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PT corp makes 300 units of A per year. At this level, the cost per unit includes $360 in direct materials, $1,000 in direct labor,
PT corp makes 300 units of A per year. At this level, the cost per unit includes $360 in direct materials, $1,000 in direct labor, $240 in variable overhead, and $900 in fixed overhead. An outside supplier has offered to make all 300 units for $2,100 per unit. If PT accepts this offer, two thirds of the fixed overhead would persist, but would be defrayed by renting out the floor space for $73,000 per year.
How much will profits change if the outside vendor is given the contract and the floor space is rented?
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