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Part T15 is used by Hill Company to make one of its products. The annual costs per unit for 7,000 units of the part are
Part T15 is used by Hill Company to make one of its products. The annual costs per unit for 7,000 units of the part are as follows: Direct materials $5.00 Direct labor 7.00 Variable manufacturing overhead 4.00 Fixed manufacturing overhead 3.00 Total cost 19.00 The fixed manufacturing overhead costs are unavoidable. An outside supplier has offered to sell 7,000 units of the same part to Hill Company for $26 per unit. In addition, the space used to make part T15 could be used to make more of one of the company's other products, generating an additional segment margin of $20,000 per year for that product. Should Hill Company purchase the part from the outside supplier? No, income will decrease by $70,000 Yes, Income will increase by $20,000 No, Income will decrease by $49,000 No, Income will decrease by $29.000 No, Income will decrease by $50,000
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