Question
Barber Manufacturing currently makes 2,000 units of gas-powered leaf blowers each year. However, the company has found a manufacturing company that can provide the blowers
Barber Manufacturing currently makes 2,000 units of gas-powered leaf blowers each year. However, the company has found a manufacturing company that can provide the blowers at a price of $14 each. The company is considering purchasing the blowers. If the company purchases the blower, the machine can be used to produce 5,000 units of another product that would generate a contribution of $2 per unit. There will be no need of supervisor if Barber goes for outsourcing. Barber's standard cost for a blower is listed below.
Direct Material...................................................................................................... $4
Direct labor..........................................................................................................2
Variable cost.........................................................................................................3
Fixed Cost
Depreciation ..................................................................................... 3
CEO's Salary.......................................................................................2
Supervisor's salary (directly connected with blower)......49
Cost per unit$18
Required: Should Barber purchase the blower outside or make it at his own
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