Savoy Enterprises manufactures one of the components used to assemble its main company product. Specialty Products, Inc., has offered to make the component at a cost of $12.70 per unit. Savoy Enterprises' current cost is $15.25 per unit of the component, based on the 120,000 components that Savoy Enterprises currently produces. Read the requirements. Incremental Analysis Outsourcing Decision Requirement 1. If Savoy Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? (Enter a "0" for any zero balances. Use a minus sign or parentheses in the Difference column when the cost to make exceeds the cost to buy.) Variable costs Plus: Fixed costs Total cost of 120,000 components Less: Profit from another product Net cost Data table Make Component Direct material per unit. Direct labor per unit.. Variable manufacturing overhead per unit.. Fixed manufacturing overhead per unit Total manufacturing costs per unit $ $ 6.00 6.75 1.50 1.00 15.25 Outsource Component This current cost per unit is based on the following calculations: (Click the icon to view the information.) X None of Savoy Enterprises' fixed costs will be eliminated if the component is outsourced. However, the freed capacity could be used to build a new product. This new product would be expected to generate $29,000 of contribution margin per year. Difference JU Requirements 1. If Savoy Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? 2. What is the maximum price per unit Savoy Enterprises would be willing to pay if it outsources the component?

Savoy Enterpriwes manufactures one of the components used to assemblo its main comparty product. Spocialty Products, Ine, has offerod to make the component at a cost of $12.70 per unit. Savoy Enterprises' curtent cost is $15.25 per unit of the component, based on the 120,000 components that Savoy Enterpises currently produces. Read the reguirements: This current cost per unit is based on the following calculations: (Click the icon to view the information) None of Savoy Enterprises' fxed costs will be eliminated if the component is ouscourced. However, the freed capacity could be used to buld a now product. This new product would be expected to generate $29.000 of contribution margin per year. Requirement 1. If Savoy Enterprises outsources the manulacturing of the component, wit operating income increase or decrease? By how much? iEnter a "O" fot any zero balances. Use a minus sign or parentheses in the Difference column when the cost to make erceeds the cost to buy) Data table Requirements 1. If Savoy Enterprises outsources the manulacturing of the oomponent, wil operating income increase or decrease? By how much? 2. What is the maximum price per unit Savoy Enterprises would be wiling to pay if it outsources the component