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I dont understand at all!! Please help soon Question: Mueller Corporation has been manufacturing its own widgets that are used in producing its final product.

I dont understand at all!! Please help soon

Question: Mueller Corporation has been manufacturing its own widgets that are used in producing its final product. The cost of manufacturing 10,000 widgets is summarized below.

Direct Materials $20,000
Direct Labor 16,000
Variable factory overhead 9,000
Fixed Factory Overhead 15,000
Total manufacturing costs $60,000

A supplier offers to produce the widgets that XYZ needs for $5.30 plus freight costs of $0.50 per widget. If the company decides to buy from the supplier, 40% of the fixed factory overhead which represents depreciation and insurance costs will be avoided. Also, if the company chooses to buy the widget, the space used to manufacture the widgets before can be rented out to a tenant for $17,500

Should the company continue to make the widget or purchase it from the outside supplier?

Other than the cost savings, what other qualitative factors should the company consider before deciding to outsource the widgets?

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