Solution for QID #11579: ABC Company is currently manufacturing AB21, producing 40,00 | StudyHelpMe

ABC Company is currently manufacturing AB21, producing 40,000 units annually. The part is used in the production of several products made by ABC. The cost per unit for AB21 is as follows: Direct materials $7.00 Direct labor 4.00 Variable overhead 1.50 Fixed overhead 4.00 Total unit cost $16.5 Of the total fixed overhead assigned to AB21, $75,000 is direct fixed overhead (the lease of production machinery and salary of a production line supervisor – neither of which will be needed if the line is dropped). The remaining fixed overhead is common fixed overhead. An outside supplier has offered to sell the part to ABC for P14. There is no alternative use for the facilities currently used to produce the part. Required: a. Should ABC Company make or buy part AB21? b. What is the most ABC would be willing to pay an outside supplier? c. If ABC bought the part, by how much would income increase or decrease? d. Now suppose that all of the fixed overhead is common fixed overhead. D1. Should ABc make or buy part AB21? (1 pt) D2. What is the most ABC would be willing to pay an outside supplier? D3. If ABC bought the part, by how much would income increase or decrease?