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