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Charlie's Motors must decide whether to make or buy some of its components. The cost of producing 70,000 units per year of switches for its
Charlie's Motors must decide whether to make or buy some of its components. The cost of producing 70,000 units per year of switches for its motors is as follows: Total Cost $ Direct materials 42000 Direct labour 72000 Variable manufacturing overhead 30000 Fixed manufacturing overhead 45000 Total manufacturing cost 189000 The company has an opportunity to buy the switches from Sicong's Switches at $3.10 per unit. If the company purchased the switches, all of the variable costs and 60% of the fixed costs will be eliminated. Part(a) Assume Charlie's Motors has no alternative use for the facilities presently devoted to the production of the switches. If Sicong's Switches offers to sell the switches for $3.15 each, should Charlie's Motors accept the offer? Fully support your answer with appropriate calculations. Part (b) Would your answer be different if the released productive capacity will generate additional income of $32000? How much financial income increase or decrease if optoin b materialised
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