Hanson, Inc. makes 1,000 units per year of a part called a "prositron"

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Hanson, Inc. makes 1,000 units per year of a part called a "prositron" for use in one of its products. Data concerning the unit production costs of the prositron follow:

 

Direct materials                                                $342

Direct labor                                              80

Variable manufacturing OH                             48

Fixed manufacturing OH                       520

Total                                                    $990 

 

An outside supplier has offered to sell Hanson, Inc. all of the prositrons it requires. If Hanson, Inc. decided to discontinue making the prositrons, 10% of the above fixed manufacturing overhead costs could be avoided.

 

Required:  Assume Hanson, Inc. has no alternative use for the facilities presently devoted to production of the prositrons. If the outside supplier offers to sell the prositrons for $850 each, should Hanson, Inc. accept the offer? Fully support your answer with appropriate calculations.

    • 8 years ago
    Hanson, Inc. makes 1,000 units per year of a part called a "prositron"
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