Brio Company Produces a Part That Is Used in the Manufacture

question 45

Essay

Brio Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 6,000 units, are as follows:
$\begin{array}{|l|r|}\hline \text { Direct materials } & \$ 5 \\\hline \text { Direct labor (variable cost) } & 6 \\\hline \text { Variable manufacturing overhead } & 3 \\\hline \text { Fixed manufacturing overhead } & \underline{4} \\\hline \text { Total cost } & \$ 18 \\\hline\end{array}$ Fine Company has offered to sell 6,000 units of the same part to Brio Company for $17.50 per unit. Assuming the company has no other use for its facilities and that the fixed manufacturing costs are unavoidable. What should Brio Company do?

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