The programs are run on computers, and the company operates an in-house production facility that manufactures and

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The programs are run on computers, and the company operates an in-house production facility that manufactures and packages CDs for shipment to customers.

In 2011, the production plant prepared 3,000,000 CDs and incurred the following costs:

Units processed ........ 3,000,000

Labor ............ $1,000,000

Material ........... 5,400,000

Supervisory salaries ....... 300,000

Depreciation of equipment ... 400,000

Heat, light, phone, etc. ...... 200,000

Total ............. $7,300,000

Leslie Eastman, an accounting manager, has been given the responsibility to analyze outsourcing the production of CDs. Her report is provided below.


Required

Should production of CDs be outsourced? Unlike Leslie, support your answer with appropriate calculations.


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