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Case #3 Bluejay Company makes a 3-inl forestry tool that includes a hauler, handle extension and T-bar attachment. Currently, the company makes all components of
Case #3 Bluejay Company makes a 3-inl forestry tool that includes a hauler, handle extension and T-bar attachment. Currently, the company makes all components of the 3-in-1 forestry tool in-house. Recently, Bluejay Company was approached by a vendor offering to supply one of the components, the T-bar attachment, for $12.00 each. Bluejay Company uses 22,500 of these components per year. To manufacture the T-bar attachment, Bluejay Company incurs the following per-unit production costs: Direct materials Direct labour Variable overhead Fixed overhead $6.00 $3.00 $2.25 $4.50 If production of the T-bar attachment is outsourced, 30% of the fixed overhead costs incurred by Bluejay Company could be avoided. Required (A) Based on financial considerations alone, should Bluejay Company outsource production of the T-bar attachment? What would be the financial impact of this decision? (B) Before deciding whether to accept the supplier's offer, what other factors should management of Bluejay Company consider
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