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ROWENA Corporation manufactures laser printers. ROWENA currently manufactures the 32,000 imaging drums that it uses in its printers. The annual costs to manufacture these
ROWENA Corporation manufactures laser printers. ROWENA currently manufactures the 32,000 imaging drums that it uses in its printers. The annual costs to manufacture these 32,000 drums are as follows: Variable Mfg cost Fixed Mfg cost Total cost P 736,000 2,080,000 P 2,816,000 Hardware Solutions, Inc. has offered to provide Rowena with all of its imaging drum needs for 72 per drum. If Rowena accepts this offer, 70% of the fixed manufacturing cost above could be totally eliminated. Also, Rowena will be able to use the freed-up space to generate $240,000 of income each year in the production of alternative products. The cost to make is O P2,432,000 O $2,192,000 $2,304,000 976,000
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