Chapter 13 In-Class Case A company currently makes a product (Product A) that requires part #445. The following costs are required to meet the annual need of 100,000 units of part #445 which is produced in 200 batches: $ 50 30 Direct materials Direct labor Total manufacturing overhead Total unit cost 20 $100 A supplier has offered to supply the needed part #445 for $17.00 each. If the company accepts the supplier's offer, its direct material costs will decrease by 10%, its direct labor costs will decrease by 25%, and its unit-related overhead will decrease by 30%. In addition, if component #445 is not produced internally, the number of batches required will be reduced by 25%. An analysis of the total manufacturing overhead reveals that unit-related overhead is $10 per unit, batch-related overhead is $1,000 per batch, and facility-sustaining overhead is $800,000 There is no product-sustaining overhead. 1. Should the company accept the supplier's offer 2. Assume that if the company accepts the offer, it can use the released space to increase the production of the different product. This increased production will increase profits by $200,000. Should the company accept the supplier's offer? 3. Discuss additional factors the company should consider before deciding whether to continue making part #445 this offer or not