Should the firm accept the outside offer

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Reference no: EM132450876

Question 1) Baker Corp. manufactures a high-tech recliner for weary professors after accounting classes. The motor housing unit costs for 17,500 units:

direct material 105

direct labor 70

variable overhead 50 (10% is avoidable)

fixed overhead 60 (95% is a corporate allocation of common costs)

A Far East firm has offered to supply the part for $200

Question a) should the firm accept the outside offer?

Question b) Assume the firm could rent out the manufacturing space used to assemble this part for a yearly rental of $120,000. Does this rental opportunity change the decision? Show all calculations.

Reference no: EM132450876

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