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What would be net saving or costs to outsource to nusteel

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Reference no: EM131805819

Problem

The Radial Tyre manufacturing company currently makes inner mesh for use in finished tyres. It requires 3,000 of inner mesh each month. NuSteel has offered to provide inner mesh for $33 per unit. If the mesh was outsourced there would be savings in Fixed Overhead of $5,000 per month. Radial Tyres costs per unit are:

 

$/per unit

Materials

10

Direct Labour

15

Variable Overheads

12

Allocated Fixed Overhead

6

What would be the net saving or costs to outsource to NuSteel?

Reference no: EM131805819

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