Mini-Exercise 16-3 (Algo) The make or buy decision LO 16-2, 16-3

Lakeside Incorporated produces a product that currently sells for $61.20 per unit. Current production costs per unit include direct materials, $17; direct labor, $19; variable overhead, $8.50; and fixed overhead, $8.50. Product engineering has determined that a certain part of the product conversion process could be outsourced. Raw material costs would not be affected, but direct labor and variable overhead costs would be reduced by 30%. No other opportunity is currently feasible for unused production capacity.

Required:

What would be the net cost advantage or disadvantage if Lakeview decided to outsource part of the conversion process at a cost of $6.80 per unit?

Note: Do not round your intermediate calculations. Round your final answer to 2 decimal places.

Should Lakeside outsource part of the conversion process at a cost of $6.80 per unit?