Flat Stitch needs three different pieces of material in order to produce one jersey. Currently the material is made by Flat Stitch. During the monh of March, Flat Stich produced 4,000 pieces of material. The recorded the following costs: Direct Materials $4.00 Direct Labor $1.50 Manufacturing Overhead $1.30 The manufacturing overhead is made up of $1.00 per unit of variable overhead and $.30 of allocated fixed costs. Flat Stitch determined that they will need to supply 6,000 pieces of material for next years jerseys. Jersey Mike's has offered to sell Flat Stich the material that they need for their jerseys for $7 per unit.

 If Flat Stich decides to take Jersey Mike's offer, all of the variable costs, and $1200 of the fixed costs will be avoided. Should Flat Stitch accept or decline the offer from Jersey Mike's?

Answer rating: 100% (QA)

Flat Stitch is currently producing the material for their jerseys inhouse incurring costs for direct ... View the full answer