1 QUESTION 1 7 MARKS 14 MINUTES 2 3 Stregobor Corp produces all the parts it uses to manufacture its products. The following costs per unit were incurred in 4 manufacturing 75,000 units of Part 399: 5 6 Direct materials $ 3.50 Direct labour 2.00 8 Variable overhead 1.50 9 Fixed overhead 6.00 10 A supplier has offered to sell 75,000 units of part 899 to Stregobor for $12 per unit. If Stregobor accepts the offer, fixed overhead could be reduced by 50% per unit. In addition, the facilities used to produce B99 could be used to manufacture Part C182 for which Stregobor has been unable to meet current demand. Sales of C182 should increase by 30%. The most recent income 11 statement for part C182 is as follows: 12 13 Sales 14 Variable costs $ 360,000 168,000 120,000 72,000 15 Fixed costs Operating income 16 17 18 Required: a) Calculate the change in Stregobor's incremental income if the supplier's offer is accepted. b) Should the supplier's offer be accepted? 19 20 21