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Every year Flint Industries manufactures 7,600 units of part 231 for use in its production cycle. The per unit costs of part 231 are as

Every year Flint Industries manufactures 7,600 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows:

Direct materials

$ 3.00

Direct labor

9.00

Variable manufacturing overhead

7.00

Fixed manufacturing overhead

10.00

Total

$29.00

Sandhill, Inc., has offered to sell 7,600 units of part 231 to Flint for $33 per unit. If Flint accepts Sandhill's offer, its freed-up facilities could be used to earn $12,500 in contribution margin by manufacturing part 240. In addition, Flint would eliminate 50% of the fixed overhead applied to part 231.

Calculate total relevant cost to make and net cost to buy.

Total relevant cost to make

Net relevant cost to buy

Should Flint accept Sandhill's offer?

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