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Pearl Inc. makes 20,000 units per year of Part Y for use in one of its products. Pearl Inc. incurred the following manufacturing costs when producing...
Pearl Inc. makes 20,000 units per year of Part Y for use in one of its products. Pearl Inc. incurred the following manufacturing costs when producing the 20,000 units of Part Y.
Direct materials $300,000
Direct labor 125,000
Variable manufacturing overhead 50,000
Fixed manufacturing overhead 175,000
Total $650,000
Required
Assume Pearl Inc. has no alternative use for the facilities presently devoted to production of Part Y and that none of the fixed costs are avoidable. If the outside supplier offers to sell Part Y for $23 each, should Pearl Inc. accept the offer? Please clearly state your answer and support your answer with appropriate calculations.
