RJ Manufacturing is considering buying the mounting brackets it uses to make its fire extinguishers from an outside supplier. Currently, RJ Manufacturing makes the brackets in its own manufacturing facility. RJ Manufacturing can buy the brackets for $0.75 each.

The company uses 700,000 brackets each year. Information about RJ Manufacturing’s cost to manufacture the 700,000 brackets follows:

Required: Prepare a relevant cost schedule that indicates whether RJ Manufacturing should buy the brackets or continue to make them.

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Direct material Direct labor Variable overhead Fixed overhead Total Per Unit $.30 Total $210,000 .10 70,000 .40 280,000 .15 98,000 $.94 $658,000 Fixed cost for RJ Manufacturing would not change if the company stopped making the brackets.