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Question - Jerry Auto Company manufactures a part for use in its production of automobiles. When 10,000 units are produced, the costs per unit are:
Direct materials $17
Direct labor 60
Variable manufacturing overhead 28
Fixed manufacturing overhead 32
Total $137
Monty Company has offered to sell 10,000 units of the part for $129 per unit to Jerry Auto Company. The plant facilities could be used to manufacture another item at a savings of $182,000 if Jerry accepts the offer. Also, $22 per unit of fixed manufacturing overhead on the original part would be eliminated.
Which alternative is best for Jerry Auto Company? By how much? Show work.
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