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Question 1 (10 points) Flounder Manufacturing makes recreational motor boats. The company currently manufactures all the components themselves but have been approached by an outside

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Question 1 (10 points) Flounder Manufacturing makes recreational motor boats. The company currently manufactures all the components themselves but have been approached by an outside supplier to provide the motors for the boats. The outside supplier is offering to sell Flounder the motors for $120 each. The following is the cost information for producing the motors internally: Per unit 10.000 motors per year Direct materials $55.00 $550,000 Direct Labour $30.00 $300,000 Variable manufacturing overhead S20.00 S200.000 Fixed manufacturing overhead $20.00 $200.000 Total S125.00 S1.250.000 The fixed manufacturing overhead are common cost that are allocated to the motors and are unavoidable if Flounder stops making the motors. Required: A) Assuming the company has no alternative use for the facilities now being used to produce the motors, should the outside supplier's offer be accepted? Show all calculations. B) Suppose that if the motors were purchased, Flounder Manufacturing could use the freed capacity to launch a new product. The contribution margin of the new product is $200,000 per year. Should Flounder Manufacturing accept the offer to buy the motors from the outside supplier for $120 each. Show all calculations

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