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Hayley Company makes a semi-finished car parts for the automobile industry that has a unit contribution margin of $125 to Miramax. A major customer,
Hayley Company makes a semi-finished car parts for the automobile industry that has a unit contribution margin of $125 to Miramax. A major customer, Sophie Car Parts, has been purchasing 50 units per month from Hayley for many years, but has indicated that it would prefer to purchase them already machined to its specifications. Sophie has offered to pay an additional $25 per unit for the finished units. To meet those specifications, Hayley would have to rent additional equipment at a cost of $1,000 per month and incur labor and other direct costs of $2 per unit. Calculate advantage or disadvantage of further processing for Hayley.
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