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P Company currently manufactures all component parts used in the manufacture of various small appliances....

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Accounting

P Company currently manufactures all component parts used in the manufacture of various small appliances. A steel handle is used in three different products. The current year budget for 20,000 handles has the following unit cost:

Direct material $0.60

Direct labor 0.40

Variable overhead 0.10

Fixed overhead 0.20

Total unit cost $1.30

A steel company has offered to supply 20,000 handles to P Company for $1.25 each, which includes delivery. Should the offer be accepted?

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