Exercise 7-5 (Part Level Submission)

Schopp Inc. has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 60% of direct labor cost. The direct materials and direct labor cost per unit to make the lamp shades are $3.98 and $4.90, respectively. Normal production is 33,600 table lamps per year. A supplier offers to make the lamp shades at a price of $13.20 per unit. If Schopp Inc. accepts the supplier