Problem
Lindon Company uses 5,000 units of Part X each year as a component in the assembly of one its products. The company is presently producing Part X internally. The variable costs per unit and fixed costs are as follows: An outside supplier has offered to provide Part X at a price of $13 per unit. If Lindon Company stops producing the part internally, one-third of the fixed manufacturing overhead would be eliminated. Prepare an analysis to show whether Lindon Company should accept the outside supplier's offer.