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Lakeview Engine, Inc. produces engines for the watercraft industry. An outside manufacturer has offered to supply several component parts used in the engine assemblies, which
Lakeview Engine, Inc. produces engines for the watercraft industry. An outside manufacturer has offered to supply several component parts used in the engine assemblies, which are currently being produced by Lakeview. The supplier will charge Lakeview $325 per engine for the sel of parts. Lakeview's current costs for those part sets' are direct materials, $160, direct labor, $80; ard manufacturn overhead ap ed at 100% or direct abor. Variable manufactu n overhead is considered to be 20% of he dial, and ned overhead a t hange the art its re o r o no outside supplier. Required: a. What would be the net cost advantage or disadvantage if Lakeview decided to purchase the parts? b. Should Lakeview Engine, Inc., continue to make the part sets or accept the offer to purchase them for $3252 O Lakeview Engine, Inc. should continue to make the part sets Lakeview Engine, Inc. should accept the offer to purchase the part sets for 325
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