Davey 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 $12.90 per unit. Davey Enterprises' cun'ent cost is $16.00 per unit of the component, based on the 90,000 components that Davey Enterprises currently produces. Read the muirements. This current cost per unit is based on the following calculations: a (Click the icon to view the information) None of Davey Enterprises' xed 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 $27,000 of contribution margin per year. Requirement 1. If Davey 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.) Incremental Analysis Make Outsource Outsourcing Decision Component Component Difference Variable costs Plus: Fixed costs Tomi cost of 90,000 components Less: Prot from another product Net cost If Davey Enterprises outsouroes the manufacturing of the component, operating income will by Requirement 2. What is the maximum price per unit Davey Enterprises would be willing to pay if it outsources the component? Begin by identifying the basic formula that is used to determine the indifferent outsourcing cost per unit. Cost if making 90,000 components = Cost if outsourcing 90,000 components EX Requirements If Davey Enterprises outsouroes the manufacturing of the component, will operating income increase or decrease? By how much? What is the maximum price per unit Davey Enterprises would be willing to pay if it outsources the component? Using the basic formula you determined above solve for the indifferent outsourcing cost per unit. (Round your answer to the nearest cent, $X.XX.) Davey Enterprises manufactures one of the components used to assemble its main company product. Specialty This current cost per unit is based on the following calculations: Products, Inc., has offered to make the component at a cost of $12.90 per unit. Davey Enterprises' current cost is a (Click the icon to view the informalin_) $16.00 per unit of the component, based on the 90,000 components that Davey Enterprises currently produces. None of Davey Enterprises' xed 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 $27,000 of contribution margin per year. Read the @uirements. column when the cost to make exceeds the cost to buy.) Incremental Analysis Make Outsource Outsourcing Deolslon Component Component Difference Data table Variable costs Plus: Fixed costs Direct material per unit .................. $ 4.75 Total cost of 90,000 components Direct labor per unit. 7.75 Less: Prot from another PFOdUd Variable manufacturing overhead per unit. . 0.75 2.75 Net cost = = = Fixed manufacturing overhead per unit . . , _ $ 16.00 Total manufacturing costs per unit ........ If Davey Enterprises outsources the manufacturing of the component, operating income will by Requirement 2. What is the maximum price per unit Davey Enterprises would be willing to pay if it outsources the component? Begin by identifying the basic formula that is used to determine the indifferent outsourcing cost per unit. - 9 Cost if making 90,000 components = Cost if outsourcing 90,000 components Using the basic formula you determined above solve for the indifferent outsourcing cost per unit. (Round your answer to the nearest cent, $X.XX.) The maximum price per unit Davey Enterprises would be willing to pay if it outsources the component is per unit