Question 5 Part A (6 Marks) Lemon Electric produces insulators for use in high- voltage applications. The company's normal production volume is 3,000 per month. The maximum production capacity is 4,000 insulators per month. The current selling price per insulator is $630. The cost per unit of manufacturing and marketing an insulator at the normal volume is shown below: $30 Manufacturing costs Marketing costs Direct materials $80 Variable Direct labor $100 Fixed Variable overhead $20 Fixed overhead $100 $70 Required An outside contractor is willing to supply 1,500 insulators at a price of $250 per unit. If the offer is accepted, the company will make 1,500 insulators in-house and buy 1,500 insulators from the contractor. The company's fixed manufacturing costs will decline by 15%. Variable marketing costs will decline by 20%. Finally, acceptance of the offer would mean that a capital improvement project that is expected to increase fixed marketing costs by 15% would be unnecessary. Determine whether the contractor's offer should be accepted. (6 Marks)