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Northstar uses 200 units of component RT82 each month. One of Northstar's suppliers has offered to supply this component at a price of $4,300 per
Northstar uses 200 units of component RT82 each month. One of Northstar's suppliers has offered to supply this component at a price of $4,300 per unit. Northstar's cost of manufacturing one unit of component RT82 at its own facilities is as follows: Direct material $300 60 11,400 Material handling (20% of direct material cost) Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing cost per unit 11,000 2.400 $5,160 Other information: Material handling costs are variable costs of receiving these materials of the fixed manufacturing overhead, two-thirds of the cost would continue even if the component was manufactured by the supplier. If Northstar purchased the units from the supplier, the idle plant capacity could be rented out to earn revenue of $150,000 per month. Required (8 marks): If Northstar purchases the units from the supplier, by how much wil net income increase or decrease? Should Northstar purchase these units from the supplier? Show your work
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