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?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 17E: Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside...
Related questions
Question
please help me to solve this problem
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning