Page 1: Question 2 (12 points) 2 3 Listen Terry Inc. manufactures machine parts for aircraft engines. CEO Bucky Walters is 5 6 considering an offer from a subcontractor to provide 2,000 units of product OP89 for $120,000. If Terry does not purchase these parts from the subcontractor, it must continue to produce them in-house with these costs: Cost per Unit Direct materials $ 28 Direct labor 18 Variable overhead 16 Allocated fixed overhead 4 The fixed overhead has been allocated and the plant manager has indicated that regardless of the number of units being produced the fixed cost will still be incurred. Required: (approximate time needed to complete this question is 13 minutes) 1. What is the relevant cost per unit to make the product internally? Which option should the business choose? (7 marks) 2. What is the total net advantage or disadvantage between the two options? (5ge 1: Unit Direct materials $ 28 N 3 Direct labor 18 Variable overhead 16 Allocated fixed overhead 4 5 6 The fixed overhead has been allocated and the plant manager has indicated that regardless of the number of units being produced the fixed cost will still be incurred. Required: (approximate time needed to complete this question is 13 minutes) 1. What is the relevant cost per unit to make the product internally? Which option should the business choose? (7 marks) 2. What is the total net advantage or disadvantage between the two options? (5 marks) A/