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E8-27A (similar to) Question Help Davey Enterprises manufactures one of the components used to assemble its main company product. Specialty Products, Inc., has offered to make the component at a cost of $12.90 per unit. Davey Enterprises' current cost is $18.00 per unit of the component based on the 85,000 components that Davey Enterprises currently produces. Read the requirements This current cost per unit is based on the following calculations: (Click the icon to view the information.) None of Davey Enterprises' fixed costs will be eliminated if the component is outsourced. However, the freed capacity could be used to build a new product. This new product would be expected to generate $28,000 of contribution margin per year. Requirement 1. If Davey Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? (Enter a "0" for any zero balances. Use a minus sign or parentheses in the Difference column when the cost to make exceeds the cost to buy.) Make Component Outsource Component Data Table Difference Incremental Analysis Outsourcing Decision Variable costs Plus: Fixed costs Total cost of 85,000 components Less: Profit from another product 2.75 i Direct material per unit Direct labor per unit Variable manufacturing overhead per unit Fixed manufacturing overhead per unit Total manufacturing costs per unit Requirements Net cost 18.00 1. If Davey Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? 2. What is the maximum price per unit Davey Enterprises would be willing to pay if it outsources the component? Print Done Print Done Enter any number in the edit fields and then click Check Answer. narts