Colden Enterprises manufactures one of the components used to assemble its main company product Specialty Products, Inc., has offered to make the component at a cost of $12.50 per unit. Colden Enterprises' current cost is $14.25 per unit of the component based on the 125,000 components that Colden Enterprises currently produces. Read the requirements. This current cost per unit is based on the following calculations: : (Click the icon to view the information.) None of Colden Enterprises' fixed costs will be eliminated if the component is outsourced. However, the freed capacity could be used to build a new product. This new product would be expected to generate $33,000 of contribution margin per year. Requirement 1. If Colden Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? (Enter a "0" for any zero balances. Use a minus sign or parentheses in the Difference column when the cost to make exceeds the cost to buy.) Make Outsource Incremental Analysis Outsourcing Decision Component Component Difference - X Data Table Variable costs Plus: Fixed costs Total cost of 125,000 components 4.50 Less: Profit from another product 5.25 3.00 Net cost Direct material per unit. $ Direct labor per unit... Variable manufacturing overhead per unit Fixed manufacturing overhead per unit ... $ Total manufacturing costs per unit ........ 1.50 14.25 - X Requirements 1. If Colden Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? 2. What is the maximum price per unit Colden Enterprises would be willing to pay if it outsources the component? Print Done Enter any number in the edit fields and then click Check