Kelly Gas Grill Company produces 200,000 RV22 propane gas regulator and valve assemblies each year for use in its gas grill factory. Kelly’s gas grills are known for quality and have a reputation of lasting a lifetime. At 200,000 units per year, the cost per unit is as follows:

competitor, Econo Grill, is interested in purchasing 80,000 RV22 assemblies from Kelly.
Econo Grill has offered to pay $12.30 per unit. Kelly has the capacity and can easily manufacture the parts for Econo Grill.
Several managers at Kelly are concerned that there would be almost no financial benefit if the RV22 assemblies are sold for $12.30 each.
Required:

a. Prepare a schedule that details the advantage or disadvantage of selling the 80,000 RV22 assemblies to Econo Grill.

b. Discuss the qualitative aspects of selling the parts to Econo Grill.

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Direct material Direct labor Variable overhead Fixed overhead Total $ 3.02 2.44 1.20 5.60 $12.26