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Parrot Enterprises manufactures one of the components used to assemble its main company product. Specialty Products, Inc has offeredto make the component at a cost of $12.50 per unit. Parrot Enterprises' current cost is $13.75 per unit of the component, based on the 115,000 components that Parrot Enterprises currently produces. This current cost per unit is based on the following calculations (Click the icon to view the information.) None of Parrot 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 $31,000 of contribution margin per year Read the requirements Requirement 1. If Parrot 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.) Data Table Incremental Analysis Make Outsource Outsourcing Decision Component Component Difference Variable costs Plus: Fixed costs Total cost of 115,000 components Less: Profit from another product Net cost Direct material per unit Direct labor per unit Variable manufacturing overhead per unit Fixed manufacturing overhead per unit 5.25 6.50 0.50 1.50 13.75 Total manufacturing costs per unit If Parrot Enterprises outsources the manufacturing of the component, operating income will Requirement 2. What is the maximum price per unit Parrot Enterprises would be willing to pay if it outsources the comp Begin by identifying the basic formula that is used to determine the indifferent outsourcing cost per unit. by $ Print Done Cost if making 115,000 components Cost if outsourcing 115,000 components Using the basic formula you determined above solve for the indifferent outsourcing cost per unit. (Round your answer to the nearest cent, SX.XX.) The maximum price per unit Parrot Enterprises would be willing to pay if it outsources the component isS per unit

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