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Mini-Exercise 16-3 (Algo) The make or buy decision LO 16-2, 16-3 Lakeside Incorporated produces a product that currently sells for $43.20 per unit. Current production
Mini-Exercise 16-3 (Algo) The make or buy decision LO 16-2, 16-3 Lakeside Incorporated produces a product that currently sells for $43.20 per unit. Current production costs per unit include direct materials, $12; direct labor, $14; variable overhead, $6.00; and fixed overhead, $6.00. 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: a. What would be the net cost advantage or disadvantage if Lakeview decided to outsource part of the conversion process at a cost of $4.80 per unit? Note: Do not round your intermediate calculations. Round your final answer to 2 decimal places. b. Should Lakeside outsource part of the conversion process at a cost of $4.80 per unit
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