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Parton Company, a manufacturer of snowmobiles, is operating at 80% of plant capacity. Parton's plant manager is considering making the headlights now being purchased from an outside supplier for $12.80 each. The Parton plant has idle equipment that could be used to manufacture the headlights. The design engineer estimates that each headlight requires $4.45 of direct materials, $3.45 of direct labor, and $6.45 of manufacturing overhead. Forty percent of the manufacturing overhead is a fixed cost that would be unaffected by this decision. A decision by Parton Company to manufacture the headlights should result in a net gain (loss) for each headlight of: (CMA adapted)
a) $1.03.
b) $(1.55).
c) $2.32.
d) $3.56.
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Parton Company, a manufacturer of snowmobiles, is operating at 80% of plant capacity. Parton's plant...
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