What is the total dollar amount of net benefit

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Problem:

A company produces 18,000 units of one of its products. Management is considering outsourcing production of this product. The following are the manufacturing costs for the product.

DIrect materials 325$

Direct labor 570$

Variable manufacturing overhead 205$

Avg fixed manufacturing overhead 68$

Total cost/uinit 1,168$

The company can purchase the product from a third party for700$ per unit. if the company outsources the product, 360,000$ of fixed overhead will the eliminated?

What is the total dollar amount of net benefit or net cost associated with the outsourcing decision?

Reference no: EM133196840

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