Climate-Control, Inc., manufactures a variety of heating and air-conditioning units. The company is currently manufacturing all of its own component parts. An outside supplier has offered to sell a thermostat to Climate-Control for $35 per unit. To evaluate this offer, Climate-Control, Inc., has gathered the following information relating to its own cost of producing the thermostat internally:Explain your answer

		Per Unit		15,700 Units per year
Direct materials	$	9	$	141,300
Direct labor		11		172,700
Variable manufacturing overhead		3		47,100
Fixed manufacturing overhead, traceable		9*		141,300
Fixed manufacturing overhead, common, but allocated		13		204,100
Total cost	$	45	$	706,500

*40% supervisory salaries; 60% depreciation of special equipment (no resale value).

Required:

1a.	Assuming that the company has no alternative use for the facilities now being used to produce the thermostat, compute the total cost of making and buying the parts. (Enter "0" wherever required. Round your Fixed manufacturing overhead per unit rate to two decimal places in intermediate calculations.)

1b.

Should the outside supplier's offer be accepted?

	Reject
	Accept

2a.	Suppose that if the thermostats were purchased, Climate-Control, Inc., could use the freed capacity to launch a new product. The segment margin of the new product would be $143,880 per year. Compute the total cost of making and buying the parts. (Round your Fixed manufacturing overhead per unit rate to two decimals.)

2b.

Should Climate-Control, Inc., accept the offer to buy the thermostats from the outside supplier for $35 each?

	Accept
	Reject