Need help with Analyzing Outsourcing versus Master Budget

1.Given avoidable costs, calculate whether the outsourcing decision will save costs in total.

2.Provide an opinion as to whether this business deal is acceptable.

3.Are there any nonfinancial considerations?

Master Budget Relevant Costs Outsource Relevant Costs

Units to produce - 127,500

Variable Costs - per unit

Production - $5.55 $7.50

Selling - $.10 $.05

Total Var Cost p/u - $5.65 $7.55

Fixed Costs

Selling - $157,625 $50,000

Administration - $189,150 $40,000

Total Fixed costs = $346,775 $90,000

Total Cost - $1,066,513 $1,052,625

Cost per unit produced $8.36 $8.26