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SoftSeats produces chairs and couches for reception areas and executive suites. Historically, SoftSeats has manufactured their own cushions for the chair they sell. However, a
SoftSeats produces chairs and couches for reception areas and executive suites. Historically, SoftSeats has manufactured their own cushions for the chair they sell. However, a cushion manufacturer has recently approached SoftSeats with an offer to produce their cushions for them for $45 per cushion. SoftSeats incurs the following costs in the production of the seat cushions: $10 for direct materials, $20 for direct labor, $10 for variable overhead, and $10 for fixed overhead. Management is wondering whether the should accept the offer. What would be the increase or decrease in per-unit costs if the cushions were purchased from the outside supplier? By how much would operating income increase or decrease? Attach File Browse My Computer Browse Content Collection
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