Q2) 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
a) should the firm accept the outside offer?
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.
