Evan Corp. is considering the possibility of outsourcing the production some upholstered chair pads that are included with some of its wooden chairs. The company has received a bid from a company in Mexico to produce 1300 units per year for $9 each. Evan has the following information about its own production of the chair pads:

Direct materials $ 3

Direct labor 1

Variable manufacturing overhead 2

Fixed manufacturing overhead 4

Evan has determined that all variable costs could be eliminated by dropping production of the chair pads, and that 40 percent of the fixed manufacturing overhead is avoidable. At this time, Evan has no specific use in mind for the space currently dedicated to producing the chair pads. If Evan decides to outsource the production of the chair pads what is the incremental profit (loss) from outsourcing? If you calculate a loss enter as -, Example a loss of $1,000 would be entered -1,000. Leave no spaces.

Evan Corp. is considering the possibility of outsourcing the production some upholstered chair pads that are included with some of its wooden chairs. The compary has received a bid from a company in Mexico to produce 1300 units per year for $9 each. Evan has the following informaticn about its own production of the chair pads: Direct materials $3 Drect labor Variable manulacturing overitesd 2 Fired manulacturing overthead Evan has determined that all variable costs could be elminated by dropping production of the chair pads, and that 40 percent of the foced manulacturing overhead is avoidabile. At tha time, Evan h no specific use in mind for the space currently dedicated to producing the chale pads. If Evan decides to outsource the production of the chair pads what is the incremental profit (loss) from outsourcing? I you calculate a loss enter as . Example a loss of $1,000 would be entered 1,000. Leave no spaces. Selected Answer: 3,900 Correct Answer 1,8201