McKinson Publishers produces the book covers for its hardbound books. Recently, Marliss

Book Binders purchased new robotic equipment that cutsm trims and prints book covers in

one process. Marliss offered to provide book covers for McKinson at $1.45 per book. Daniel

Nguyen, the management accountant for McKinson Publishers, analyses the cost information

for internally producing hardbound book covers as follows:

Total costs for 200,000 book Cost per covers unit Direct materials $100,000 $0.50 Direct labour $80,000 $0.40 Manufacturing overhead $100,000 $0.50 Supervisor's salary $901000 M Total cost $3703000 $1.85