Company manufactures medical scooters for people who need assistance in mobility. Facing rising utilities expenses and labour costs, Company is contemplating outsourcing the production of one of its product lines, FreeMe. Currently, Company makes 2,300 units of FreeMe annually. The cost structure for one unit of FreeMe is as follows: Direct Materials Direct Labour Variable Overhead Fixed Overhead 5146 167 54 122 Company cost accountant analyzed the fixed overhead and found that several costs are allocated to FreeMe at a rate of 40%. Company's total corporate fixed overhead costs consist of Testing & Inspection, 92,000, Design & Engineering, $149,500, Rent - Factory, 586,250, and Machine related costs, $310,500. In addition, FreeMe pays $25,300 per year to rent a warehouse to store the finished product before shipping to customers. A Chinese manufacturer offers to produce FreeMe at 5435 per unit. A further study of the fixed overhead costs finds that once FreeMe is autsourced, FreeMe will no longer be charged the costs for Testing & Inspection. Company will be able to reduce the Design & Engineering cost by half, and thus the cost saving will be passed on to FreeMe. The space and machine used by making FreeMe will be freed up to produce other product. However, there is no demand to increase the production of of product line. Your answer is correct. Calculate the total cost per unit for FreeMe. Total Manufacturing Costs 1489 Your answer is partially correct. Try again. Should Company outsource FreeMe? Net Cost of outsourcing 1124700 Company should not outsource FreeMe. Your answer is partially correct. Try again. Suppose there is a demand for other product lines, and the Rent - Factory and Machine related costs allocated to FreeMe now can be allocated another product line. Should Company outsource FreeMe? Nec henefit of outsourcing Company Should outsource FreeMe