Sheridan Manufacturing incurs unit costs of $7.00 ($5.00 variable and $2.00 fixed) in making a sub-assembly...

 

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Sheridan Manufacturing incurs unit costs of $7.00 ($5.00 variable and $2.00 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 10,000 of the parts for $5.40 per unit. If it accepts the offer, Sheridan will save all variable costs and $1.00 of fixed costs. Prepare an analysis showing the total cost savings, if any, that Sheridan will realize by buying the part. (Round per unit answers to 2 decimal places, eg. 15.25. If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Sheridan Manufacturing incurs unit costs of $7.00 ($5.00 variable and $2.00 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 10,000 of the parts for $5.40 per unit. If it accepts the offer, Sheridan will save all variable costs and $1.00 of fixed costs. Prepare an analysis showing the total cost savings, if any, that Sheridan will realize by buying the part. (Round per unit answers to 2 decimal places, eg. 15.25. If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).)