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Lakeside Incorporated produces a product that currently sells for $57.60 per unit. Current production costs per unit include direct materials, $16; direct labor, $18; variable
Lakeside Incorporated produces a product that currently sells for $57.60 per unit. Current production costs per unit include direct materials, $16; direct labor, $18; variable overhead, $8.00; and fixed overhead, $8.00. Product engineering has determined that a certain part of the product conversion process could be outsourced. Raw material costs would not be affected, but direct labor and variable overhead costs would be reduced by 30%. No other opportunity is currently feasible for unused production capacity. Required: a. What would be the net cost advantage or disadvantage if Lakeview decided to outsource part of the conversion process at a cost of $6.40 per unit? Note: Do not round your intermediate calculations. Round your final answer to 2 decimal places. b. Should Lakeside outsource part of the conversion process at a cost of $6.40 per unit
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