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What would change if company a could use the free space

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Question - Company A makes 10,000 units per year of its product and has the following costs:

Direct Material = $10/unit

Direct Labor = $5/unit

Variable Overhead Costs = $3/ unit

Variable selling cost= $6 per unit.

Also, depreciation expense = $30,000 per year on a machine with resale val of $5000 and a fixed manufacturing overhead of $40,000 per year has been allocated to its product.

Another Company B has offered to sell them 10,000 units of a good substitute for Company A's product for $280,000.

What is the financial advantage/disadvantage of accepting the offer?

What would change if Company A could use the free space from accepting the offer to manufacture a new product which would increase profits by $60,000?

Reference no: EM132965070

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