Roccabruna Corporation currently produces 5,000 tablecloths per period. The production cost per tablecloth is:

Direct materials	$5
Direct labor	2
Unit-related overhead	1
Total	$8

Batch-related overhead is $1,000 per batch and 5 batches are normally used to produce 5,000 tablecloths. Facility-sustaining overhead is $300,000 per period, and 10 percent is allocated to the tablecloth product line. A private contractor has offered to supply all of the labor needed for production at a cost of $2.50 per tablecloth. If this offer is accepted, direct laborers will be laid off and unit-related overhead will decrease by 70 percent. Should Roccabruna accept the contractor's offer? Why or why not? What other factors should Roccabruna consider?

Answer rating: 100% (QA)

Evaluation of Direct labor force whether employed internally or outsourc... View the full answer