Deer currently manufactures a subcomponent that is used in its main product. A supplier has offered to supply all the subcomponents needed at a price of $12. Deer currently produces 80,000 subcomponents at the following manufacturing costs: 
a. If Deer has no alternative uses for the manufacturing capacity, what would be the profit impact of buying the subcomponents from the supplier?
b. If Deer has no alternative uses for the manufacturing capacity, what would be the maximum price per unit they would be willing to pay the supplier?
c. Now assume Deer would avoid $120,000 in equipment leases and salaries if the subcomponent were purchased from the supplier. Now what would be the profit impact of buying from the supplier?
Definitions:
Merchandise
Goods that are bought and sold by businesses; also refers to the commodities or products available for sale in retail or wholesale.
Total Value
The entire worth of an asset, portfolio, or company, factoring in all components of value.
Perpetual Inventory System
An inventory management system that updates inventory records for each purchase and sale transaction in real-time.
FIFO
An inventory valuation method that assumes the first items placed in inventory are the first sold, hence "First In, First Out."
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