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Hawkins Audio​ Video, Inc. manufactures digital cameras. Hawkins is considering whether it should outsource production of...

Hawkins Audio​ Video, Inc. manufactures digital cameras. Hawkins is considering whether it should outsource production of a part used in the manufacturing of its cameras.​ 50,000 units of the part were made by Hawkins last year. At this production​ level, the company incurred the following direct product​ costs:

Direct Materials     

​$250,000

Direct Labor                        

​$104,000

Manufacturing Overhead incurred during the same period for production of the part is represented by the following cost behavior​ equation: y​ = $0.10x​ + $50,000.

If the part were purchased from an outside​ supplier, 25% of the total fixed manufacturing overhead cost would be​ eliminated, and the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional income from this other product would be​ $12,500 per year.

A supplier has been identified who can sell the part to Hawkins at a price of​ $7.80 per unit. Which of the following statements is incorrect assuming​ 60,000 units of the part will be needed next​ year?

A. Qualitative​ considerations, such as whether the purchased part is of equal quality to its manufactured​ part, should be considered by Hawkins.

B. At a purchase price of​ $7.80, the cost to make is less than the cost to buy.

C. The variable product costs required to make one part is​ $7.18.

D. The total cost to make the part next year is​ $480,800.

E. If production is​ outsourced, operating income will decrease by​ $6,000.

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