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Business, 21.06.2020 03:57 sirdre1982

The Manchester Company manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for 10,000 units of Part No. 498 is as follows: Direct materials Variable direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead allocated Total manufacturing cost per unit $ 3 40 10 21 $74 The Remnant Company has offered to sell 10,000 units of Part No. 498 to Manchester for $71 per unit. Man- chester will make the decision to buy the part from Remnant if there is an overall savings of at least $45,000 for Manchester. If Manchester accepts Remnant’s offer, $11 per unit of the fixed overhead allocated would be eliminated. Furthermore, Manchester has determined that the released facilities could be used to save relevant costs in the manufacture of Part No. 575. For Manchester to achieve an overall savings of $45,000, the amount of relevant costs that would have to be saved by using the released facilities in the manufacture of Part No. 575 would be which of the following: (a) $30,000, (b) $115,000, (c) $125,000, or (d) $100,000? Show your calculations. What other factors might Manchester consider before outsourcing to Remnant?

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The Manchester Company manufactures Part No. 498 for use in its production line. The manufacturing c...
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