Wynham Stereos produces and sells speakers and CD players. The following information about the costs related to the systems has been collected.

Wynham Stereos normally produces 25000 of these systems per year.
The managers have recently received an offer from a New Zealand company to produce these systems for $108 each. The managers estimate that $260000 of Wynham Stereos’ fixed costs could be eliminated if it accepted the offer.

Required
(a) Perform a quantitative analysis for the decision.
(b) Identify as many uncertainties as you can for this decision.
(c) Prepare a brief report to management on your recommendations.

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Selling price per unit Total fixed overhead $ 130 360 000 Production costs per unit Direct materials Direct labour Variable overhead $42 36 22