Dawson Company manufactures watches. They produce $25,000$ units of watch cases each year

for use on their production line. The cost per unit for the watch case is listed below:

Direct Materials $$5\mathrm{.}00$

Direct Labor $$8\mathrm{.}00$

Variable Overhead $$3\mathrm{.}00$

Fixed Overhead $$9\mathrm{.}00$

Total cost per watch case: $$25\mathrm{.}00$

An outside supplier has offered to sell $25,000$ watch cases to Dawson Company for $$22\mathrm{.}99$ per

watch case. If Dawson Company accepts this offer, the facilities used to manufacture the watch

cases could be rented to another company at an annual rental fee of $$100,000.$ Also, Dawson

Company has determined that $$3$ of incremental fixed manufacturing overhead would be

incurred if the company makes the watch case.

$$ Should Dawson Company accept the offer to outsource the watch cases? Explain.

$$ Construct an incremental analysis of the two alternatives using an Excel worksheet to

support your decision.