Parsons Plumbing & Heating manufactures thermostats that it uses in several of its products. Management is considering whether to continue manufacturing the thermostats or to from an outside source. The following information is available: buy them The company needs 80,000 thermostats per year. Thermostats can be purchased from an out side supplier at a cost of S6 per unit. 2. The cost of manufacturing thermostats is $7.50 per uni, computed as follows: Direct materials . . . Direct labor Manufacturing overhead: . $156,000 132,000 168,000 $600,000 $7.50 3. Discontinuing the manufacture of the thermostats will eliminate all of the direct materials and direct labor costs but will eliminate only 60 percent of the variable overhead costs. 4. If the thermostats are purchased from an outside source, certain machinery used in the pro- duction process would no longer have to be leased. Accordingly, $9,200 of fixed overhead costs could be avoided. No other reductions will result from discontinuing production of the thermostats Instructions Prepare a schedule to determine the incremental cost or benefit of buying thermostats from the outside supplier. On the basis of this schedule, would you recommend that the compan manufacture thermostats or buy them from the outside source? . tats are purchased from the outside source, the factory space previously Assume that if thermos used to produce thermostats can be used to manufacture an additional 6,000 heat-ow regu- lators per year. These regulators have an estimated contribution margin of S18 per unit. T manufacture of the additional heat-flow regulators would have no cffect on fised overhcai Would this new assumption change your recommendation as to whether to make or buy thermostats? in support of your conclusion, prepare a schedule showing the incrementai c or benefit of buying thermostats from the outside source and using the factory duce additional heat-flow regulators. b. space to pro- . , s mommy operating pront it it accepts the otter and it is pro- ducing and selling 35,000 normal crates per month. What is tho opportunity costjof accepting the offer? The cost to Swank Company of manufacturing 15,000 units of a particular part is $135,000, of which $60,000 is fixed and $75,000 is variable. The company can buy the part from an outside supplier for S6 per unit. Fixed costs will remain the same regardless of Swank's decision. Should the company buy the part or continue to manufacture it? Prepare a comparative schedule in the format illustrated in Exhibit 21-6 Bacrometer, Inc., makes part no. 566 on one of its production lines. Each month Bacrometer makes 5,000 of part no. 566 at a variable cost of S2 per part. The monthly fixed costs for the production line are $20,000, or $4 per part. Bacrometer has been provided a bid for part no. S66 from anothor manufacturer that will make the part for S3 per part. Bacrometer knows the production li be rented to another manufacturer for S6,000 per month. Should Bacrometer continue to make part no. 566 or should it buy the part and rent the production line? e could