7. Perry's Cycle Company manufactures annually 20,000 units of TushSeat, a bicycle seat used on many...

Transcribed Image Text:

7. Perry's Cycle Company manufactures annually 20,000 units of TushSeat, a bicycle seat used on many of the company's products, and also sold directly to retailers for $38 per unit. At the current level of production, the cost per unit to produce Tush Seat consists of: Direct materials Direct labor Variable overhead Fixed overhead $9 $7 $6 $3 It has come to the attention of management that a seat of similar quality can be purchased from outside suppliers. Refer to the Perry's information above. Assume that Perry's fixed costs remain unchanged if the seats are purchased from an outside supplier. In order to operate more profitably by buying the seats rather than manufacturing them, Perry must negotiate a price per unit from the outside supplier that is less than what: Show all your workings (3 p) Refer to the Perry's information above. Assume that seats can be purchased from the outside supplier at $25 each, and that 60% of total fixed costs incurred in producing TushSeat will be eliminated by this strategy. Buying the seats instead of manufacturing them would cause Perry's operating income to increase or decrease? And by what amount: (4 p) Show all your workings 7. Perry's Cycle Company manufactures annually 20,000 units of TushSeat, a bicycle seat used on many of the company's products, and also sold directly to retailers for $38 per unit. At the current level of production, the cost per unit to produce Tush Seat consists of: Direct materials Direct labor Variable overhead Fixed overhead $9 $7 $6 $3 It has come to the attention of management that a seat of similar quality can be purchased from outside suppliers. Refer to the Perry's information above. Assume that Perry's fixed costs remain unchanged if the seats are purchased from an outside supplier. In order to operate more profitably by buying the seats rather than manufacturing them, Perry must negotiate a price per unit from the outside supplier that is less than what: Show all your workings (3 p) Refer to the Perry's information above. Assume that seats can be purchased from the outside supplier at $25 each, and that 60% of total fixed costs incurred in producing TushSeat will be eliminated by this strategy. Buying the seats instead of manufacturing them would cause Perry's operating income to increase or decrease? And by what amount: (4 p) Show all your workings