Goof-E Corporation currently manufactures a subassembly for its main product. The costs per unit are...
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Goof-E Corporation currently manufactures a subassembly for its main product. The costs per unit are as follows:
| Direct materials | $3.40 |
| Direct labour | $29.80 |
| Variable overhead | $16.10 |
| Fixed overhead | $25.20 |
| Total costs | $74.50 |
Mouse Corp. has contacted Goof-E with an offer to sell it 4,700 subassemblies for $55.20 each.
- Should Goof-E make or buy the subassemblies? Create a schedule that shows the total quantitative differences between the two alternatives. What are two qualitative things Goof-E should consider when considering this offer? What would you recommend the company do?
- The accountant decides to investigate the fixed costs to see whether any incremental changes will occur is the subassembly is no longer manufactured. The accountant believe that Goof-E will eliminate $48,880 of fixed overhead if it accepts the proposal. Does this new information change the decision and if so how?
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