Having just designed the "Revolution Seating System," Current Designs must now decide whether to produce the seats internally or buy them from an outside supplier. The costs for Current Designs to produce the seats are as follows.
Direct materials $18 /unit
Direct labor $18 /unit
Variable overhead $14 /unit
Fixed overhead $20,000
Current Designs will need to produce 2,850 seats this year; 28% of the fixed overhead will be avoided if the seats are purchased from an outside vendor. After soliciting prices from outside suppliers, the company determined that it will cost $53 to purchase a seat from an outside vendor.
Would your answer in (a) change if the productive capacity released by not making the seats could be used to produce income of $23,000? (Enter decrease in net income then enter with a negative sign preceding the number or parenthesis, e.g. -15,000 or (15,000).)
