A manufacturer produces a computer model that includes a chip. The manufacturer is considering outsourcing...
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Accounting
A manufacturer produces a computer model that includes a chip. The manufacturer is considering outsourcing the production of this chip to a subcontractor. On a per-unit basis, the manufacturer incurs the following expenses: $3 of direct materials $3 of direct labor $1 of variable overhead $2 of supervisory salary $3 of equipment depreciation $6 of allocated general overhead The subcontractor has proposed selling the chips to the manufacturer for $14 per unit. The manufacturer needs 10,000 chips annually. If the manufacturer outsources production of the chips, the supervisor will be laid off. Why should or shouldn't the manufacturer outsource production of the chips?
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