managerial accounting 2

A company makes 4,000 units per year of a part called an axial tap for use in one of its products. Data concerning the unit production costs of the axial tap follow: Direct materials. Direct labor Variable manufacturing overhead...... Fixed manufacturing overhead ............ Total manufacturing cost per unit. $35 10 8 120 S73 An outside supplier has offered to sell the Company all of the axial taps it requires. If the Company decided to discontinue making the axial taps, 50% of the above fixed manufacturing overhead costs could be avoided. Assume the Company has no alternative use for the facilities presently devoted to production of the axial taps. If the outside supplier offers to sell the axial taps for $70 each, should the Company accept the offer? Fully support your answer with appropriate calculations. (8 marks) 1 1 E E E E 3