• Justin Video produces various equipment for home theatre and sound systems. One key component in all of its products is a speaker module that requires two specific speakers and is configured from a custom combination of the two speakers. The firm currently incurs the following costs to make each speaker module: Direct material $24 Direct labor 16 Variable overhead 10 Fixed overhead 20 Of the per-unit fixed overhead, the firm could avoid $8 if the modules were purchased from a company that has offered to sell an equivalent module for $56. Justin Video produces 20,000 modules annually.
• Required: (Consider each requirement to be independent of the others.) 
• a. Should Justin Video outsource the production of the module? Show calculations. 
• b. Justin Video’s vice president, Fred Flick, estimates that the company can rent out the facilities used to make the modules for $120,000 annually. What should the company do? Show calculations. 
• c. What are some qualitative factors that Justin Video should consider in making this speaker module outsourcing decision?
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Answer rating: 100% (QA)

b Given data Direct material Direct labour variable overheads fixed overheads of the per unit fixed ... View the full answer