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Ariel Gem Products is considenng buying the casters it uses in the manufacture of office chairs from an outside vendor. Currently, Anel Gem Products makes
Ariel Gem Products is considenng buying the casters it uses in the manufacture of office chairs from an outside vendor. Currently, Anel Gem Products makes the casters in its own manufacturing facility. Aniel Gem products can buy the casters for $1.15 each. The company uses 450,000 casters each year. Information about Ariel Gem Products cost to manufacture the 450,000 casters follows: Direct matenal Direct labor Variable overhead Fixed overhead Total Per Unit $.50 10 40 25 $1.25 Total $225,000 45,000 180,000 112.500 $562,500 Fixed cost for Ariel Gem Products would not change if the company stopped making the casters Required: A. Prepare a relevant cost schedule that indicates whether Ariel Gem Products should buy the casters or continue to make them. B. If Ariel purchased the casters, management has approached you to produce Gidgets that will eam a profit of $120,000 per year. Does this change your decision?? C. Give two qualitative factors would influence your decision
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