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Bell Company makes 40,000 units per year of a part it uses in the products it manufactures. The per unit product cost of this part
Bell Company makes 40,000 units per year of a part it uses in the products it manufactures. The per unit product cost of this part is shown belowa direct materials ariable overhead . .. . 13.95 tatak $80.65 An outside supplier has offered to sell Bell Company 40,000 units of this part a year for $76.70 per unit. If Bell Company accepts this offer, the facilities now being used to make this part could be used to make more units of a product that is in high demand. The additional contribution margin that could be earned on this other product would be $112,000 per year. If Bell Company accepts the outside supplier's offer, $4.15 of the fixed overhead cost being applied to the part would continue to be incurred and would be allocated to the company's remaining products. The remaining amount of the fixed overhead would be eliminated if Bell accepts the outside supplier's offer. A) Calculate the amount by which the company's net income will increase if Bell Company accepts the outside suppliers offer. B) Calculate the selling price per unit charged by the outside supplier that would make Bell Company economically indifferent between making and buying the part
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