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Moon, Inc. manufactures 60,000 units of part A-2 each year for use on its production line. At this level of activity, the cost per unit
Moon, Inc. manufactures 60,000 units of part A-2 each year for use on its production line. At this level of activity, the cost per unit for part A-2 is as follows: $4.20 8.90 1.90 10.00 $25.00 Direct materials Direct labor Variable overhead Fixed overhead Total cost per unit An outside supplier has offered to sell 60,000 units of part A-2 each year to Moon, Inc. for $23.00 per part. If Moon, Inc. accepts this offer, the facilities now being used to manufacture part A-2 could be rented to another company at an annual rental of $80,000. However, Moon, Inc. has determined that one-half of the fixed overhead being applied to part A-2 would continue even if part A-2 were purchased from the outside supplier. Required: Prepare computations showing how much profits will increase or decrease if the outside supplier's offer is accepted
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