E8-29A (similar to) Question Help Parrot Enterprises manufactures one of the components used to assemble its main |This current cost per unit is based on the following calculations. company product. Specialty Products, Inc., has offered to make the component at (Click the icon to view the information ) a cost of $12.70 per unit Parrot Enterprises' current cost is $14 75 per unit of the component, based on the 80,000 components that Parrot Enterprises currently None of Parrot Enterprises' fixed costs will be eliminated if the component is produces. outsourced However, the freed capacity could be used to build a new product Read the requirements This new product would be expected to generate $27,000 of contribution margin per year Requirement 1. If Parrot 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 i Data Table X Outsourcing Decision Component Component Difference Variable costs Plus Fixed costs Direct material per unit ..... . . . . .. . 5 4.00 Total cost of 80,000 components Direct labor per unit . 7 25 Less Profit from another product Variable manufacturing overhead per unit .. 0 50 Fixed manufacturing overhead per unit 3 00 Net cost 14 75 Total manufacturing costs per unit . i Requirements X Print Done If Parrot Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? 2. What is the maximum price per unit Parrot Enterprises would be willing to pay if it outsources the component? Check Answer O B CAUALT FA F5 F8 FO F11 F12 PrtSc Insert 5 6 O W E R O P