Davey enterprises manufactures one of the components used to send both main company product. Specialty products has offered to make a component at a cost of $12.90 per unit TV enterprises current cost is $16 per unit of its component, based on 125,000 components that TV enterprise is currently produces. none of DV enterprises fix cars will be illuminated if the component is outsourced however the free capacity could be used to build a new product. This new product would be expected to generate $25,000 of contribution margin per year.

the cost to buy.) Make Incremental Analysis Outsourcing Decision Variable costs Data table Component 12.50 Outsource Component 12.90 Difference 40 (3.5) 3,5 0 Plus: Fixed costs Total cost of 125,000 components Less: Pront from another product 1612500 2000000 25000 (387500) 25000 Direct material pe Direct labor per Variable manufact 0 1975000 1612500 (362500) Not cost Fixed manufactur Total manufacturi increase by If Davey Enterprises outsources the manufacturing of the component, operating income will 362500 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 125,000 components Cost if outsourcing 125,000 components Pri Using the basic formula you determined above solve for the indifferent outsourcing cost per unit. (Round your answer to the nearest cant $xxx) per unit The maximum price per unit Davey Enterprises would be willing to pay if it outsources the component is Data table $ 5.25 Direct material per unit Direct labor per unit Variable manufacturing overhead per unit .. 6.25 1.00 Fixed manufacturing overhead per unit 3.50 $ 16.00 Total manufacturing costs per unit Print Done This current cost per unit is based on the following calculations: Click the icon to view the information.) None of Davey Enterprises' fixed costs will be eliminated if the component is outsourced. However, the freed capacity could be used o build a new product. This new product would be expected to generate $25,000 of contribution margin per year. Incremental Analysis Make Outs nude MAITA AAAA Comp Direct materials + Direct labor Direct materials + Direct labor + Variable costs Sales revenue - Fixed costs - Sales revenue - Total costs - jent, o prises Sales revenue - Variable costs e indiffe Variable costs + Fixed costs ost if ou TI Using the basic formula vou determinadahnuo pakin for the indian