Question
1. La Salle, Inc. makes 1,000 units per year of a part called a widget for use in one of its products. Per the cost
1. La Salle, Inc. makes 1,000 units per year of a part called a widget for use in one of its products. Per the cost accounting department, the cost to make one widget is as follows:
| Direct materials...................................................................................................... | $342 |
| Direct labor...................................................................................................... | 80 |
| Variable manufacturing overhead...................................................................................................... | 48 |
| Fixed manufacturing overhead...................................................................................................... | 520 |
| Total manufacturing cost per unit...................................................................................................... | $990 |
An outside supplier has offered to sell La Salle, Inc. all of the widgets it requires. All of the fixed manufacturing overhead costs will continue even if the widgets are purchased from the outside supplier.
Required:
Assume La Salle, Inc. has no alternative use for the facilities presently devoted to production of the widgets. If the outside supplier offers to sell the widgets to La Salle, Inc. for $850 each, should La Salle, Inc. accept the offer? Fully support your answer with appropriate calculations.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started