McGill Company produces a single product that sells for $25 per unit. At the companys current volume of 6,000 units per month, the costs of producing and selling the product are as follows: Per unit Total Direct materials $ 3.50 $ 21,000 Direct labor 4.50 27,000 Variable manufacturing overhead 3.00 18,000 Fixed manufacturing overhead* 4.00 24,000 Variable marketing & administrative 2.50 15,000 Fixed marketing & administrative 2.00 12,000 Total cost $19.50 $117,000 *Fixed manufacturing overhead costs consist of capacity-related costs such as equipment depreciation, rent, insurance, supervisors salaries, etc. Use the information above to answer the following independent questions.

e. A proposal is received from an outside manufacturer who will make and ship the product (all 6,000 units) directly to the companys customers. If the proposal is accepted, 30% of the fixed manufacturing costs would be avoidable while the remaining 70% is allocated plant costs. Bergens fixed marketing costs would not be affected by the proposal, but its variable marketing costs would be eliminated. No other use has been identified for the idle capacity. (1) Compute the unit cost that is relevant for comparison to a price quoted by the outside manufacturer. (2) What other factors should Bergen consider in deciding whether to outsource production of the product?