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Martin Company currently manufactures all component parts used in the manufacture of various hand tools. The Extruding Division produces a steel handle used in
Martin Company currently manufactures all component parts used in the manufacture of various hand tools. The Extruding Division produces a steel handle used in three different tools. The budget for these handles is 131,000 units with the following unit cost. Direct material Direct labor $0.82 0.51 Variable overhead 0.43 Fixed overhead 0.42 Total unit cost $ 2.18 Polishing Division purchases 10,000 handles from the Extruding Division and completes the hand tools. An outside supplier, Venture Steel, has offered to supply 10,000 units of the handle to Polishing Division for $2.13 per unit. The Extruding Division currently has idle capacity that cannot be used. What is the cost impact to Martin as a whole of purchasing from Venture Steel? (CMA adapted) O decrease the handle unit cost by $0.80. Odecrease the handle unit cost by $0.37. increase the handle unit cost by $0.37. increase the handle unit cost by $0.05.
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