The Gilster Company, a machine tooling firm, has several plants. One plant, located in St. Cloud, Minnesota, uses a job order costing system for its batch production processes. The St. Cloud plant has two departments through which most jobs pass. Plant-wide overhead, which includes the plant managers salary, accounting personnel, cafeteria, and human resources, is budgeted at $200,000. During the past year, actual plantwide overhead was $185,000. Each departments overhead consists primarily of depreciation and other machine-related expenses. Selected budgeted and actual data from the St. Cloud plant for the past year are as follows.

e. A St. Cloud subcontractor has offered to produce the parts for job no. 110 for a price of $8.5 per unit. Assume the St. Cloud sales force has already committed to the bid price based on the calculations in part b. Should the St. Cloud plant buy the $8.5 per unit part from the subcontractor or continue to make the parts for job no. 110 itself?

f. Would your response to part e change if the St. Cloud plant could use the facilities necessary to produce parts for job no. 110 for another job that could earn an incremental profit of $17,000?

Incremental profit earned by producing the other job ?

Incremental cost of buying the parts from the subcontractor?

Increase in total profits?