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Discuss variable manufacturing costs per unit

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The Cornell Milling Company manufactures an intermediate product identified as W1. Variable manufacturing costs per unit of W1 are as follows:

Direct materials $ 5
Direct labor $15
Variable manufacturing overhead $10

Ithaca Tools has offered to sell Cornell Milling 10,000 units of W1 for $40 per unit. If Cornell Milling accepts the offer, $50,000 of fixed manufacturing overhead will be eliminated. Applying differential analysis to the situation, Cornell Milling should:
Buy W1; the savings is $100,000
Buy W1; the savings is $50,000
Make W1; the savings is $100,000
Make W1; the savings is $50,000

Reference no: EM131753590

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