Montel Firm is considering whether to outsource the manufacture of subcomponent JXY. The accounting department provides the following cost information for manufacturing 10,500 units of subcomponent JXY per month. Direct materials costs | | $38,500 | | Direct labour costs | | 31,100 | | Variable overhead | | 14,800 | | Fixed overhead* | | 12,000 | | *Fixed overhead includes $4,200 supervisors salary. International Firm agrees to supply Montel with 10,500 units per month for a total cost of $135,500. If subcomponent JXY is outsourced, Montel will be able to increase the production and sales of its final product by 1,000 units per month; the product is sold for $115 per unit and its average variable costs per unit are $75. The supervisors salary will be eliminated if subcomponent JXY is outsourced. | | | |