Barber Manufacturing currently makes 2,000 high-end kaleidoscopes each year. Barber has been manufacturing all parts of the units. However, the company has found a manufacturing company that can provide the tubes at a price of $14 each. Since the company’s machine that molds the tubes is getting old, the company is considering purchasing the tubes. If the company purchases the tubes, the machine will be idle. Barber’s standard cost of the molding process for one unit is listed below.

Direct material $4

Direct labor $2

Variable overhead $4

Direct fixed overhead (Utility cost associated with molding machine) $3

Non-differential fixed overhead $8

Total Cost $21

Required: 

Should Barber purchase the tubes or continue manufacturing them? Why?

Answer rating: 100% (QA)

Answer a Barbers should purchase the blowers as that would result in a 8000 increase in net operatin... View the full answer