Question
Laurence Corp. manufactures 8,700 products every year. The cost structure for each unit is as follows: Per unit Direct materials $ 29.00 Direct labor 30.00
Laurence Corp. manufactures 8,700 products every year. The cost structure for each unit is as follows:
| Per unit | |||
| Direct materials | $ | 29.00 | |
| Direct labor | 30.00 | ||
| Variable manufacturing overhead | 20.00 | ||
| Fixed manufacturing overhead | 11.00 | ||
| Total unit cost | $ | 90.00 | |
A supplier offered Laurence Corp. with 8,700 products at an unit price of $94.00. Assume that fixed overhead is unavoidable. How would short-term profits change if the company accepts the outside offer?
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