Problem
Stevens Company makes 50,000 units per year of Part X for use in one of its products. Stevens Company incurred the following manufacturing costs when producing the 50,000 units of Part X. Direct materials $1,000,000 Direct labor 550,000 Variable manufacturing overhead 137,500 Fixed manufacturing overhead 250,000 Total $1,937,500 Required Assume Stevens Company has no alternative use for the facilities presently devoted to production of Part X and that none of the fixed costs are avoidable. If the outside supplier offers to sell Part X for $34.50 each, should Stevens Company accept the offer? Clearly state your answer and support your answer with appropriate calculations.