Question: can you help answer this? Gem Corporation estimates it will produce 2 5 , 0 0 0 units of electronic sensor part that goes into

can you help answer this? Gem Corporation estimates it will produce 25,000 units of electronic sensor part that goes into one of their final products called Fluctotron. It currently produces the sensor internally, but is considering outsourcing this activity. Current internal capacity permits the production of a maximum of 40,000 sensors. The production manager has prepared the following information concerning the internal manufacture of 40,000 sensors: Per Sensor Drect materials 150 Direct labor 80 Variable overhead 100 Fixed overhead 110 Total Cost 440 The fixed overhead of P110 per unit includes a P20 allocation for salary paid to a supervisor to oversee production of sensors. The fixed costs would not be reduced by outsourcing, except that the supervisor would be fired (they would terminate his contract). Assume if Gem outsources, its purchase price from the outsourcer is P380 per unit. 1. Should Gem outsource? Why? 2. Assume that if Gem outsourced, it would create sufficient excess capacity such that they would retain the supervisor and have him oversee production of a new optical reading product called a Scanmeister. If each Scanmeister generates a contribution margin of P150 and they produce 10,000 Scanmeisters, what is the maximum price Gem would accept for outsourcing the sensors?

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