E8-27A (similar to) Question Help Instant Enterprises manufactures one of the components used to assemble its main company product This current cost per unit is based on the following calculations: Specialty Products, Inc., has offered to make the component at a cost of $12.60 per unit. Instant Enterprises(Click the icon to view the information.) current cost is $11.75 per unit of the component, based on the 95,000 components that instant Enterprises currently produces None of Instant Enterprises fixed costs will be eliminated if the component is outsourced. However, the freed Read the requirements capacity could be used to build a new product. This new product would be expected to generate 527,000 of contribution margin per year Requirement 1. Instant Enterprises outsources the manufacturing of the component, wil operating income increase or decrease? by how much? (Enter a "O" 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 1.021.2505 1,197,000 $ 175.750 0 0 Plus Fixed costs Total cost of 95.000 components $ 1.021.250 5 1.197.000 $ 175.750 27.000 0 27.000 Less Profit from another product $ 1.021.250 $ 1.170,000 $ 148,750 Netcost decrease by $ 148.750 Instant Enterprises outsources the manufacturing of the component operating income wil Requirement 2. What is the maximum price per unit Instant Enterprises would be willing to pay it outsources the component? Enter any number in the edit fields and then click Check Answer Check Answer Clear All All parts showing 0 Plus: Fixed costs Total cost of 95,000 components Less: Profit from another product $ 175,750 1,021,250 $ 0 1,197,000 $ 27,000 1,170,000 $ 27,000 s 1,021,250 $ 148,750 Net cost If Instant Enterprises outsources the manufacturing of the component, operating income will decrease by $ 148,750 Requirement 2. What is the maximum price per unit Instant 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 95,000 components Cost if outsourcing 95,000 components Variable costs + Fixed costs Variable costs + Fixed costs Using the basic formula you determined above solve for the indifferent outsourcing cost per unit. (Round your answer to the nearest cent, sx.xx.) The maximum price per unit Instant Enterprises would be willing to pay if it outsources the component is $ per unit Enter any number in the edit fields and then click Check Answer All parts showing Clear All MacBook Air DOO 80 F3 doo F4 F5 Instant Enterprises' fixed costs will be eliminated if the component is outsourced. However, the freed could be used to build a new product. This new product would be expected to generate $27,000 of con margin per year. - Data Table 3,750 $ 4.75 5.50 Onent? Direct material per unit Direct labor per unit Variable manufacturing overhead per unit Fixed manufacturing overhead per unit Total manufacturing costs per unit 0.50 1.00 $ 11.75 the nearest cent, $X.XX.) Print Done per unit. Check
