Marco Enterprises manufactures one of the components used to assemble its main company product. Specialty Products, Inc., has offered to make the component at a cost of $12.70 per unit. Marco Enterprises' current cost is $12.75 per unit of the component, based on the 80,000 components that Marco Enterprises currently produces. Data table This current cost per unit is based on the following calculations: (Click the icon to view the information.) Requirements None of Marco Enterprises' fixed costs will be eliminated if the component is outsourced. However, the freed capacity could be used to build a new product. This new product would be expected to generate $25,000 of contribution margin per year. Direct material per unit Direct labor per unit Variable manufacturing overhead per unit Fixed manufacturing overhead per unit Total manufacturing costs per unit $ $ 4.00 5.25 0.75 2.75 12.75 X pmponent, SA 1. If Marco Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? - 2. What is the maximum price per unit Marco Enterprises would be willing to pay if it outsources the component?

Marco Enterprises manufactures one of the components used to assemble its main company product. Specialty Products, Inc., has offered to make the component at a cost of $12.70 per unit. Marco Enterprises' current cost is $12.75 per unit of the component, based on the 80,000 components that Marco Enterprises currently produces. Data table This current cost per unit is based on the following calculations: (Click the icon to view the information.) Requirements None of Marco Enterprises' fixed costs will be eliminated if the component is outsourced. However, the freed capacity could be used to build a new product. This new product would be expected to generate $25,000 of contribution margin per year. Direct material per unit Direct labor per unit Variable manufacturing overhead per unit Fixed manufacturing overhead per unit Total manufacturing costs per unit $ $ 4.00 5.25 0.75 2.75 12.75 X pmponent, SA 1. If Marco Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? - 2. What is the maximum price per unit Marco Enterprises would be willing to pay if it outsources the component?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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