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Robin Company currently produces 8,000 units of part B13. Current costs for part B13 are as follows: Direct materials $12 Direct labor 9 Factory rent
Robin Company currently produces 8,000 units of part B13. Current costs for part B13 are as follows: Direct materials $12 Direct labor 9 Factory rent 7 Administrative 10 General factory overhead 7 Total $45 If the company decides to buy part B13, 50% of the administrative costs would be avoided. All of the Robin Company items, including part B13, are manufactured in the same rented production facility. The company has an offer from a wholesaler that wishes to sell the part to Robin for $31 per unit. What effect will occur if the company decides to accept the offer? Answer A. The cost for this part will decrease by $14 per unit. B. The cost for this part will increase by $5 per unit. C. The cost for this part will be the same. D. The cost for this part will decrease by $10 per unit
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