Mohave Corporation is considering outsourcing production of the umbrella tote bag included with some of its products. The company has received a bid from a supplier in Vietnam to produce 8,200 units per year for $9.50 each. Mohave the following information about the cost of producing tote bags:

Direct materials$ 5.00Direct labor2.00Variable manufacturing overhead1.00Fixed manufacturing overhead2.00Total cost per unit$ 10.00

Mohave determined all variable costs could be eliminated by outsourcing the tote bags, while 60 percent of the fixed overhead cost is unavoidable. At this time, Mohave has no specific use in mind for the space currently dedicated to producing the tote bags.

Required:

1. Compute the difference in cost between making and buying the umbrella tote bag.

2. Based strictly on the incremental analysis, should Mohave buy the tote bags or continue to make them?

3-a. Suppose the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $10,000 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?

Complete this question by entering your answers in the tabs below. Compute the difference in cost between making and buying the umbrella tote ba Complete this question by entering your answers in the tabs below. Does this change your recommendation to Mohave? Complete this question by entering your answers in the tabs below. Suppose the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $10,000 in annual profits. Recompute the difference in cost between making and buying the umbrella tote bag. Complete this question by entering your answers in the tabs below. Based strictly on the incremental analysis, should Mohave buy the tote bags or continue to make them? Should Mohave buy the tote bags or continue to make them