The St$.$ Paul Company manufactures Part No$.498$ for use in its production line. The manufacturing cost per unit for $35,000$ units of Part No$.498$ is as follows:

$($Click to see the manufacturing cost per unit.$)$

Read part $2\text{'}$s requirement.

Begin by selecting the labels to calculate the effect on operating income and then enter in the supporting calculations.

x units in special order

Effect on operating income

Requirement

For St$.$ Paul to achieve an overall savings of $$15,000,$ the amount of relevant costs

that would have to be saved by using the released facilities in the manufacture of

Part No$.575$ would be which of the following: $($a$)$ $$140,000,($b$)$ $$190,000,($c$)$

$$50,000$ or $($d$)$ $$315,000?$ Show your calculations. What other factors might

St$.$ Paul consider before outsourcing to Seat?

Data table

Direct materials

Variable direct manufacturing labor

Variable manufacturing overhead

Fixed manufacturing overhead allocated

Total manufacturing cost per unit

The Seat Company has offered to sell $35,000$ units of Part No$.498$ to St$.$ Paul for

$$60$ per unit. St$.$ Paul will make the decision to buy the part from Seat if there is an

overall savings of at least $$15,000$ for St$.$ Paul. If St$.$ Paul accepts Seat's offer, $$5$

per unit of the fixed overhead allocated would be eliminated. Furthermore, St$.$ Paul

has determined that the released facilities could be used to save relevant costs in

the manufacture of Part No$.575.$ What would the effect on operating income be if the special order could be accepted without affecting normal$$ sales?

A$.$

$$$$0$

B$.$

$ $87$ comma $500$$$87,500$ increase

C$.$

$ $75$ comma $000$$$75,000$ increase

D$.$

$ $162$ comma $500$$$162,500$ increase

Part $3$

$2.$ The St$.$ PaulSt. Paul Company manufactures Part No$.498$ for use in its production line. The manufacturing cost per unit for $35$ comma $00035,000$ units of Part No$.498$ is as$$ follows:

LOADING... $($Click to see the manufacturing cost per$$ unit.$)$

For St$.$ PaulSt. Paul to achieve an overall savings of $ $15$ comma $000$$$15,000,$ the amount of relevant costs that would have to be saved by using the released facilities in the manufacture of Part No$.575$ would be which of the$$ following: $($a$)$ $ $140$ comma $000$$$140,000,($b$)$ $ $190$ comma $000$$$190,000,($c$)$ $ $50$ comma $000$$$50,000$ or$($d$)$ $ $315$ comma $000$$$315,000?$ Show your calculations. What other factors might St$.$ PaulSt. Paul consider before outsourcing to SeatSeat$?$

Begin by selecting the labels to calculate the relevant costs that would have to be saved and then enter in the supporting calculations.

Cost to purchase

Total relevant costs of making: $($per unit$)$

Costs saved by not making

$\backslash$times units in the offer

Total costs saved

Extra costs of purchasing outside

Minimum savings required

Necessary relevant costs to be saved

Part $4$

For St$.$ PaulSt. Paul to achieve an overall savings of $ $15$ comma $000$$$15,000,$ the amount of relevant costs that would have to be saved by using the released facilities in the manufacture of Part No$.575$ would$$ be:

A$.$$ $315$ comma $000$

$ $315$ comma $000$$$315,000$

B$.$$ $140$ comma $000$

$ $140$ comma $000$$$140,000$

C$.$$ $190$ comma $000$

$ $190$ comma $000$$$190,000$

D$.$$ $50$ comma $000$

$ $50$ comma $000$$$50,000$

Part $5$

What other factors might St$.$ PaulSt. Paul consider before outsourcing to SeatSeat$?$

Before outsourcing to SeatSeat$,$ St$.$ PaulSt. Paul might consider

$$

how many employees Seat has.

the consequence of increasing its dependence on Seat.

St$.$ PaulSt. Paul would want to be sure about

$$

Seat's commitment to short$-$term quality goals.

the quality of Seat's product and the reliability of its delivery schedules over a long$-$run period.

St$.$ PaulSt. Paul would also want SeatSeat to

$$

continuously reduce costs.

maintain a steady increase in costs.

To achieve all these$$ goals, St$.$ PaulSt. Paul may want to

$$

be sure it does not work too closely with Seat.

build close partnerships and alliances with Seat.

What would the effect on operating income be if the special order could be accepted without affecting normal sales?$575$ would be:Before outsourcing to Seat, St$.$ Paul might considerSt. PaulSt. Paul would want to be sure aboutSt. PaulSeatSt. Paul would also want Seat toSt. PaulTo achieve all these goals, St$.$ Paul may want to