Miller Manufacturing builds and markets personal computers for home and small business use. The company has been approached by an outside supplier offering to provide completed monitors to the company for $\$ 65$ each. The company's market ing director negotiated the deal personally and is thrilled about how much cheaper it will be to purchase the monitors from outside. Producing the cost data outlined below, the manager proudly proclaims, "Look, a $\$ 9$ per unit savings!"

1. Assuming zero opportunity costs, should the company accept the outside offer?
2. If the display units are purchased from outside, Miller can produce an alternative product that will contribute $\$ 250,000$ per year toward covering indirect fixed overhead. Will this affect your decision in item (1) above?

Transcribed Image Text:

Per 15,000 Units Unit per Year Direct materials Direct labor Variable manufacturing overhead.. $28 $ 420,000 10 150,000 3 45,000 Fixed manufacturing overhead, direct 6 90,000 Fixed manufacturing overhead, indirect, 27 405,000 Total cost.. $74 $1,110,000