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What is the difference between the two alternatives

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Question - Bill Corporation currently manufactures a subassembly for its main product. The costs per unit are as follows:

Direct materials $1.00

Direct labor 10.00

Variable overhead 5.00

Fixed overhead 8.00

Total $24.00

Bill Company has contacted Stephans with an offer to sell them 5,000 of the subassemblies for $22.00 each. Stephans will eliminate $25,000 of fixed overhead if it accepts the proposal.

Should Stephans make or buy the subassemblies? What is the difference between the two alternatives?

Reference no: EM132564504

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