4. (15 pts) Rayon Corp. estimates it will produce 40,000 units of a part that...
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4. (15 pts) Rayon Corp. estimates it will produce 40,000 units of a part that goes into its final product. It currently produces this part internally, but is considering outsourcing this activity. Current internal capacity permits for a maximum of 80,000 units of the part. The production manager has prepared the following information concerning the internal manufacture of 80,000 units of the part: Per unit Direct materials Direct labor Variable overhead Fixed overhead Total cost $4.00 8 $23.00 The fixed overhead of $ 5per unit includes a S 1.40 per unit allocation for salary paid to a supervisor to oversee production of the part. The fixed costs would not be reduced byout sourcing, except the supervisor would be terminated. Assume that if Rayon outsources, its purchase price from the outsourcer is $18 per unit. A) Should Rayon outsource? B) Assume Rayon has received a special order for 26,000 units of the part from Raymax, Co. will pay Rayon S27 per part, but will take the parts only if they have been manufactured by Rayon. Thus, Raymax will engage in the special order only if Rayon does not outsource any of its production. Should Rayon accept the special order
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