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3. Offset Manufacturing produces 20,000 units of part No. 125. The production costs are: Total Cost Cost per Unit Direct materials $10,000 $.50 Direct labor
3. Offset Manufacturing produces 20,000 units of part No. 125. The production costs are: Total Cost Cost per Unit Direct materials $10,000 $.50 Direct labor 40,000 2.00 Variable manufacturing overhead 20,000 1.00 Fixed factory overhead 40,000 2.00 Total cost $110,000 $5.50 An outside manufacturer approaches Offset Manufacturing and offers to sell it the same part for $5 per unit. Offset has excess capacity. The $10,000 factory floor supervisor's salary is the only fixed cost that will be eliminated if Offset purchases the part. Determine whether Offset Manufacturing should make or buy the part
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