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Should barber purchase the blower outside or make

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Barber Manufacturing currently makes 2,000 units of gas-powered leaf blowers each year. However, the company has found a manufacturing company that can provide the blowers at a price of $14 each. The company is considering purchasing the blowers. If the company purchases the blower, the machine can be used to produce 5,000 units of another product that would generate a contribution of $2 per unit. There will be no need of supervisor if Barber goes for outsourcing.

Barber's standard cost for a blower is listed below.

Direct Material...................................................................................................... $4

Direct labor.......................................................................................................... 2

Variable cost......................................................................................................... 3

Fixed Cost

Depreciation ..................................................................................... 3

CEO's Salary.......................................................................................2

Supervisor's salary (directly connected with blower) ......4 9

Cost per unit $18

Required:

Question 1: Should Barber purchase the blower outside or make it at his own

Reference no: EM132565439

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