Question 3 Case A: Boyle Company produces a single product. The cost of producing and selling one unit of this product at the current level of activity of 8,000 units per month is as follows: Direct Materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $2.5 $3.0 $0.50 $4.25 $1.5 $2.0 The normal selling price is $15 per unit. The company's capacity is 10,000 units per month. An order has been received from a customer to buy 2,000 units at a price of $12 per unit. This order would not affect regular sales. Requirements: 1. Would you advise the company to accept this offer? How much the profit increase or decrease based on this offer assuming that fixed costs will not change? Question 3 Case B: Over years, CBSF Company has been producing a small part of steel that is uses in the manufacturing process. The company's cost per unit, based on 60,000 parts per year, is as follows: Direct Materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, common $4.0 $2.75 $0.50 $3.0 $2.25 An outside supplier has offered to supply the steel part to CBSF Company for only $10 per part. One third of the traceable fixed manufacturing overhead is supervisory salaries and other costs that can be eliminated if the parts are purchased instead of producing them. The other two thirds are not avoidable. The decision to buy the parts from the outside supplier would not have an effect on the common fixed costs of the company, and the space being used to produce the parts would otherwise be idle. Requirements: 1. Would you advise the company to outsource such parts? Why or why not? Support your answer by a convincing calculation. 2. Would your advice in the Req (1) change, if the idle capacity can be used to make another product that would generate a net operating income of $50,000? Support your answer by a convincing calculation