Bancroft currently manufactures a subcomponent that is used in its main product. A supplier has offered to supply all the subcomponents needed at a price of $122. Bancroft currently produces 20,600 subcomponents at the following manufacturing costs:

	Per unit
Direct materials		$	45
Direct labor			31
Variable manufacturing overhead			40
Fixed manufacturing overhead			21
Unit cost		$	137

a. If Bancroft has no alternative uses for the manufacturing capacity, what would be the profit impact of buying the subcomponents from the supplier? a) less profit _______

b)more profit_________ b. If Bancroft has no alternative uses for the manufacturing capacity, what would be the maximum price per unit they would be willing to pay the supplier?

Maximum Price

per units

c. Now assume Bancroft would avoid $325,000 in equipment leases and salaries if the subcomponent were purchased from the supplier. Now what would be the profit impact of buying from the supplier?

less profit _______

more profti _____