Adcox, Inc. requires 4,000 switch assemblies per year. At the current level of production, the cost per unit is as follows:

Camron, Inc. has offered to sell Adcox, Inc. the 4,000 switch assemblies for $9 each. If Adcox is no longer required to produce the switch assemblies, part of the building can be leased to another company for $10,000 per year. Other fixed overhead costs would remain the same.
Required:

a. Prepare a schedule that details the advantage or disadvantage of buying the 4,000 switch assemblies from Camron, Inc.

b. Discuss the qualitative aspects of purchasing the parts from Camron, Inc.

Transcribed Image Text:

Direct material Direct labor Variable overhead Fixed overhead Total $ 3 3 h ~ w w 2 $10