Banjo Ltd manufactures hard disk recorders for television and makes all parts for the machines, including the outside casing. The cost per unit of the casings at a production level of 150 000 units is as follows.

The fixed factory overhead cost is direct, and half of the direct fixed overhead cost could be eliminated if the casings are purchased rather than produced. An outside supplier has offered to produce and sell to Banjo Ltd 150 000 casings at a price of $80 per unit.
Required

(a) Should the offer be accepted if there are no alternative uses for the manufacturing capacity currently being used to produce the casings? Why?

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Direct labour Direct materials Variable factory overhead Fixed factory overhead Total unit cost $ 16 12 48 16 $.92