Barney Enterprises manufactures one of the components used to assemble its main company product. Specialty Products, Inc., has offered to make the component at a cost of $12.40 per unit. Barney Enterprises' current cost is $17.50 per unit of the component, based on the 90,000 components that Barney Enterprises currently produces. This current cost per unit is based on the following calculations: (Click the icon to view the information.) Read the requirements. None of Barney Enterprises' fixed costs will be eliminated if the component is outsourced. However, the freed capacity could be used to build a new product. This new product would be expected to generate $29,000 of contribution margin per year. Requirement 1. If Barney Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? (Enter a "0" for any zero balances. Use a minus sign or parentheses in the Difference column when the cost to make exceeds the cost to buy.) - X Incremental Analysis Make Outsource Requirements Outsourcing Decision Component Component Difference Variable costs Plus: Fixed costs 1. If Barney Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? 2. What is the maximum price per unit Barney Enterprises would be willing to pay if it outsources the component? Total cost of 90,000 components Less: Profit from another product Net cost Data Table If Barney Enterprises outsources the manufacturing of the component, operating income will by Requirement 2. What is the maximum price per unit Barney Enterprises would be willing to pay if it outsources the component? 4.50 Begin by identifying the basic formula that is used to determine the indifferent outsourcing cost per unit. 7.75 Cost if making 90,000 components Cost if outsourcing 90,000 components Direct material per unit $ Direct labor per unit. Variable manufacturing overhead per unit.. Fixed manufacturing overhead per unit $ Total manufacturing costs per unit 2.50 2.75 17.50 Barney Enterprises manufactures one of the components used to assemble its main company product. Specialty Products, Inc., has offered to make the component at a cost of $12.40 per unit. Barney Enterprises' current cost is $17.50 per unit of the component, based on the 90,000 components that Barney Enterprises currently produces. Read the requirements This current cost per unit is based on the following calculations: (Click the icon to view the information.) None of Barney Enterprises' fixed costs will be eliminated if the component is outsourced. However, the freed capacity could be used to build a new product. This new product would be expected to generate $29,000 of contribution margin per year. -------- Component Difference Direct materials + Direct labor Requirements Direct materials + Direct labor + Variable costs Sales revenue - Fixed costs 1. If Barney Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? 2. What is the maximum price per unit Barney Enterprises would be willing to pay if it outsources the component? Sales revenue - Total costs nent, operating income will by Sales revenue - Variable costs prises would be willing to pay if it outsources the component? e indifferent outsourcing cost per unit. Data Table Variable costs + Fixed costs ost if outsourcing 90,000 components $ 4.50 Direct material per unit. Direct labor per unit.. Using the basic formula you determined above solve for the indifferent outsourcing cost per unit. (Round your answer to the nearest cent, $X.XX.) 7.75 The maximum price per unit Barney Enterprises would be willing to pay if it outsources the component is per unit. Variable manufacturing overhead per unit.. Fixed manufacturing overhead per unit $ 2.50 2.75 17.50