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:

Direct materials……………………….…....................$5

Direct labor (variable cost)………………................6

Variable manufacturing overhead………............3

Fixed manufacturing overhead…………..............4

Total cost……………………………….......................$18

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?

Answer rating: 100% (QA)

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