Orlando auto accessories produces pickup truck bumpers that

Reference no: EM13605467

Orlando Auto Accessories produces pickup truck bumpers that it sells on a wholesale basis to new car retailers. The average bumper sales price is $160. Normal annual sales volume is 300,000 units, which is the company's maximum production capacity. At this capacity, the company's per-unit costs are as follows:

direct material $53 (includes mounting hardware cost of $15 per unit)
direct labor $17
overhead (2/3 is fixed) $45
total $115

A key component in producing bumpers is the mounting hardware used to attach the bumpers to the vehicles. Birmingham Mechanical has offered to sell Orlando Auto Accessories as many mounting units as the company needs for $20 per unit. If Orlando Auto accepts the offer, the released facilities currently used to produce mounting hardware could be used to produce an additional 4,800 bumpers.What is the net effect profit/loss of purchasing the mounting hardware?

Reference no: EM13605467

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