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Mohave Corp. is considering outsourcing production of the umbrella tote bag included with some of its products. The company nas received a bid from a
Mohave Corp. is considering outsourcing production of the umbrella tote bag included with some of its products. The company nas received a bid from a supplier in Vietnam to produce 9,300 units per year for $700 each. Mohave has the following information about the cost of producing tote bags ble setastering overhead Txed wastacturing overhead Mohave has determined that all variable costs could be eliminated by outsourcing the tote bags, while 70 percent of the fund overhead cost is unavoidable. At this time. Mohave has no specific use in mind for the space rently dedicated to producing me tote bags Required: 4. Compute the difference in cost between making and buying the umbrella tote bag. 2. Besed strictly on the incremental analysis, should Mohave buy the tote bags or continue to make there? 3-5. Suppose that the space Mohave currently uses to make the bags could be utilized by a new product ene that would generate 55.000 in annual profits. Recompute the difference in cost between making and buying the umbrella tote bag. 3-b. Does this change your recommendation to Mohave
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