Janice Foeld Company manufactures part Z for use in its production cycle.The costs per unit for 10,000 units of part Z are as follows.
| Direct materials |
$3 |
| Direct labor |
15 |
| Variable overhead |
6 |
| Fixed overhead |
8 |
| TOTAL |
$32 |
Baloney Company has offered to sell Janice Foeld 10,000 units of part Z for $30 per unit. If Janice Foeld accepts Baloney's offer, the released facilities can be used to save $45,000 in relevant costs in the manufacture of part A. In addition, $5 per unit of the fixed overhead applied to part Z would be totally eliminated.