On each problem, place answer on the designated line, and show all work for partial credit. Round all calculations to two decimal places.

1. [10 points] Moon Appliance manufactures a variety of appliances which all use Part B89. Currently, Moon Appliance manufactures Part B89 in its internal manufacturing process. Moon Appliance produces 9,000 units of Part B89 annually. The annual costs to product Part B89 at the level of 9,000 units include:

Direct materials	$3.00
Direct labor	$8.00
Variable manufacturing overhead	$4.00
Fixed manufacturing overhead	$3.00
Total cost	$18.00

In each scenario below, all of the fixed manufacturing overhead costs would continue whether Part B89 is made internally or purchased from an outside supplier. Nadal Parts Company has offered to sell 9,000 units of Part B89 to Moon Appliance for $20.00 per unit.

Given these circumstances, what should Moon Appliance do in each of the three different scenarios below:

A. If Moon Appliance has no alternative use for its manufacturing facilities:

Should Moon Appliance make the part or outsource the part? ___________

How much per unit will they save by this choice? ___________________

What is the highest price per unit that Moon Appliance should be willing to pay for the part?

_____1 point___________

B. If the facilities currently used to make the part could be rented out to another manufacturer for $18,000 a year:

Should Moon Appliance make or outsource the part? _____________

How much per unit would be saved by this choice? ___________

C. If the facilities currently used to make the part could be used to manufacture 7,000 units of another product that would have a $6 per unit contribution margin. If no additional fixed costs would be incurred:

Should Moon Appliance make or outsource the part? _____________________

How much per unit would be saved by this choice? ____________