You must show your calculations.

1. 10 points

Emil Manufacturing incurs unit costs of $7.50 to make a part for its product. A supplier offers to make 10,000 of the part at $5 per unit. The fixed costs are unavoidable.

a) Given the information below, should Emil accept the offer or not?

Direct material $2.50

Direct labor $1.25

Variable OH $0.75

Fixed OH $3.00

Total $7.50

b) What are some other aspects Emil should consider regarding this potential outsourcing?

2. 10 points

Spencer Co. manufactures and sells three products. Relevant per unit data concerning each product are given below:

Product

A B C

Selling Price $9 $12 $14

Variable costs $3 $9.50 $12

Machine hours to produce 2 1 2

a) If the company only has 1,500 machine hours available for these products, which product should be manufactured?

b) What other aspects should be considered?

3. 10 points

Pro Sports manufactures basketballs for the NBA. The company is producing 112,500 units, which is 90% of plant capacity. Data for the period is shown below:

Sales price per unit $40.00

Variable costs per unit $22.40

Fixed costs per unit $ 9.60

Pro Sports receives a special order for 20,000 basketballs from the Italian Basketball Association (IBA) at $28 each. Accepting the order would increase variable costs by a $0.50 per unit shipping charge. If the fixed costs are unavoidable, should Pro Sports accept the special order?