McCall Enterprises manufactures one of the components used to assemble its main company product. Specialty Products, Inc., has offered to make the component at a cost of $14.10 per unit. McCall Enterprises' current cost is $17.00 per unit of the component, based on the 100,000 components that McCall Enterprises currently produces. Read the requirements. This current cost per unit is based on the following calculations: : (Click the icon to view the information.) None of McCall Enterprises' fixed costs will be eliminated if the component is outsourced. However, the freed capacity could be used to build a new product. This new product would be expected to generate $30,000 of contribution margin per year. Requirement 1. If McCall Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? (Enter a "0" for any zero balances. Use minus sign or parentheses in the Difference column when the cost to make exceeds the cost to buy.) Make Incremental Analysis Outsourcing Decision Variable costs Component Outsource Component 1,410,000 Difference $ Plus: Fixed costs Total cost of 100,000 components 0 30,000 Less: Profit from another product Net cost i Requirements X 1. If McCall Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? 2. What is the maximum price per unit McCall Enterprises would be willing to pay if it outsources the component? Print Done McCall Enterprises manufactures one of the components used to assemble its main company product. Specialty Products, Inc., has offered to make the component at a cost of $14.10 per unit. McCall Enterprises' current cost is $17.00 per unit of the component, based on the 100,000 components that McCall Enterprises currently produces. Read the requirements. This current cost per unit is based on the following calculations: : (Click the icon to view the information.) None of McCall Enterprises' fixed costs will be eliminated if the component is outsourced. However, the freed capacity could be used to build a new product. This new product would be expected to generate $30,000 of contribution margin per year. Requirement 1. If McCall Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? (Enter a "0" for any zero balances. Use minus sign or parentheses in the Difference column when the cost to make exceeds the cost to buy.) Make Incremental Analysis Outsourcing Decision Variable costs Component Outsource Component 1,410,000 Difference $ Plus: Fixed costs Total cost of 100,000 components 0 30,000 Less: Profit from another product Net cost i Requirements X 1. If McCall Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? 2. What is the maximum price per unit McCall Enterprises would be willing to pay if it outsources the component? Print Done