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I would kindly request some help in my homework as per the attached - please include full explanation and references (if any) Ashville Maniraturing Ltd.

I would kindly request some help in my homework as per the attached - please include full explanation and references (if any)

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Ashville Maniraturing Ltd. produces construction equipment and several components for the construction industry. Part of its manufacturing includes a component (QR20) that it uses in several of its equipment Ashville's management is considering whether to continue manufacturing theses components on its premises or to purchase them from an outside source. The following information is available: a The company needs 6,000 of these components annually. These components (QR20) can be purchased om an outside supplier at a cost of $15 per component. b The unit cost of manufacturing this component is $35, computed as follows: Direct materials $ 50,0 00 Direct labor 65,0 00 Factory overhead: Variable 3 5,0 00 Fixed 60,000 Total manufacturing costs $210,000 Cost per unit ($2 10,0 00 + 6,000 components) c Discontinning the manufacture of the components (QR20) will eliminate all the raw materials and direct labor costs but will eliminate only ?0% of the variable factory overhead costs. d If the components (QR20) are purchased from an outside source, machinery used in the production of components will be sold at its book value. Accordingly, no gain or loss will be recogized. The sale of this machinery would also eliminate $3,000 of the fixed costs associated with depreciation and taxes. No other reductions in xed factory overhead will result from discontinuing the production of components. Required: 1 Determine the incremental cost or benet of buying the component (QRZO) om the outside supplier. Would you recommend that Ashvle manufactures these components or purchases them from the outside source? (Prepare a schedule to determine the incremental cost or benet of buying the components from outside supplier). (25 marks)

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