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What should Spahr Company do

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Reference no: EM132838793

Question - Spahr Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 5,000 units, are as follows:

Direct materials $2.00

Direct labour $4.00

Variable manufacturing overhead $3.00

Fixed manufacturing overhead $1.00

Total cost $10.00

The fixed overhead costs are unavoidable.

Erickson Company has offered to sell 5,000 units of the same part to Spahr Company for $11 per unit. Assuming the company has no other use for its facilities, what should Spahr Company do?

Reference no: EM132838793

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