Patterson has received an offer from an outside vendor to supply the upholstery for the chairs Patterson requires at $8.00 per chair. The Patterson Company produces chairs. This year's expected production is 25,000 units. Currently, Patterson makes the upholstery for the chairs in its factory. Patterson's management accountant reports the following costs for the upholstery for the 25,000 chairs: (Click to view the information.) Read the requirements. Data table Direct materials Cost for 25,000 Cost per Unit Units $ 4.00 $ 100,000 2.30 57,500 1.60 40,000 Variable direct manufacturing labor Variable manufacturing overhead Variable inspection, setup, materials handling 250,000 35,000 Allocated fixed costs of plant administration, taxes, and insurance $ 482,500 Total costs 1. Assume that if the outside vendor supplies the upholstery, the facility where the upholstery is currently made will remain idle. On the basis of financial considerations alone, should Patterson accept the outside vendor's offer at the anticipated volume of 25,000 chairs? Show your calculations. 2. For this question, assume that if the upholstery is purchased outside, the available unused facilities will be used to make pillows to match the chairs. Each pillow sells for $28 with a variable cost of $21. No other costs would change and the company expects to sell 10,000 pillows. On the basis of financial considerations alone, should Patterson make or buy the upholstery for their chairs, assuming that 25,000 chairs are produced (and sold)? Show your calculations. 3. The sales manager at Patterson is concerned that the estimate of 25,000 chairs may be high and believes that only 23,000 chairs will be sold. Production will be cut back, freeing up work space. This space can be use to make 10,000 pillows whether Patterson buys the upholstery or makes it in-house. On the basis of financial considerations alone, should Patterson purchase the upholstery from the outside vendor? Show your calculations. Requirement 1. Assume that the outside vendor supplies the upholstery, the facility where the upholstery is currently made will remain idle. On the basis of financial considerations alone, should Patterson accept the outside vendor's offer at the anticipated volume of 25,000 chairs? Show your calculations. (If an input field is not used in the table, leave the input field empty; do not enter a zero.) Relevant Costs Make Buy Direct materials $ 100,000 Direct manufacturing labor 57,500 Variable manufacturing overhead 40,000 Variable inspection, setup, materials handling 250,000 $ 200,000 Purchase cost Total relevant costs 447,500 $ 200,000 On the basis of financial considerations alone, should Patterson accept the outside vendor's offer at the anticipated volume of 25,000 chairs? Patterson should accept the outside vendor's offer at the anticipated volume of 25,000 chairs. Requirement 2. For this question, assume that if the upholstery is purchased outside, the available unused facilities will be used to make pillows to match the chairs. Each pillow costs $28 with a variable cost of $21. No other costs would change and the company expects to sell 10,000 pillows. On the basis of financial considerations alone, should Patterson make or buy the upholstery for their chairs, assuming that 25,000 chairs are produced (and sold)? Show your calculations. (Enter any deductions with a parentheses or a minus sign. If an input field is not used in the table, leave the input field empty; do not enter a zero.) Relevant Costs Make Buy Direct materials 100,000 57,500 40,000 Direct manufacturing labor Variable manufacturing overhead Variable inspection, setup, materials handling Additional contribution margin from selling pillows 250,000 (70,000) 200,000 Purchase cost $ 447,500 130,000 Total relevant costs On the basis of financial considerations alone, should Patterson make or buy the upholstery, assuming that 25,000 chairs are produced and sold)? Patterson should buy the upholstery, assuming that 25,000 chairs are produced (and sold). Requirement 3. The sales manager at Patterson is concerned that the estimate of 25,000 chairs may be high and believes that only 23,000 chairs will be sold. Production will be cut back, freeing up work space. This space can be use to make 10,000 pillows whether Patterson buys the upholstery or makes it in-house. On the basis of financial considerations alone, should Patterson purchase the upholstery from the outside vendor? Show your calculations. (If an input field is not used in the table, leave the input field empty; do not enter a zero.) Relevant Costs Make Buy Direct materials Direct manufacturing labor Variable manufacturing overhead Variable Inspection, setup, materials handling Purchase cost Total relevant costs