Cox, Inc. requires 3,000 spindles per year. At the current level of production, the cost per unit is as follows:

AMW, Inc. has offered to sell Cox the 3,000 spindles for $100 each. If Cox is no longer required to produce the spindles, a supervisor can be eliminatedTh.e supervisor’s salary of $36,000 is part of fixed overhead cost. Other fixed overhead costs would remain the same.

Required:

a. Prepare a schedule that details the advantage or disadvantage of buying the 3,000 spindles from AMW, Inc.

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

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Direct material Direct labor Variable overhead Fixed overhead Total $ 38 12 14 44 $108