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Part C 30 Marks Milles Fleurs Inc. incurs the following costs to produce 15,000 units of a small subcomponent used in Product X: Direct
Part C 30 Marks Milles Fleurs Inc. incurs the following costs to produce 15,000 units of a small subcomponent used in Product X: Direct materials Direct labor Variable overhead Fixed overhead $8,400 11,250 12,600 16,200 An outside supplier has offered to sell Milles Fleurs the subcomponent for $2.85 a unit. If the company accepts the offer, it could use the production capacity to produce another product that would generate additional income of $3,600. Additionally, $2,200 of the company's fixed overhead will be avoided. Requirement: Using Incremental Analysis, advise Milles Fleurs Inc. as to whether they should continue to make the subcomponent or purchase them from the outside supplier. (30 Marks)
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