Business, 24.11.2021 02:20 BigGirlsTheBest

Filtration, Inc. manufactures filters for use in secondary water irrigation systems. The costs per unit, for 20,000 filters, are as follows. Direct materials $3.00
Direct labor 4.00
Variable overhead 1.00
Fixed overhead 2.00
Total costs $10.00

Irrigation Products has offered to sell 20,000 filters to Filtration for $10 per filter. If Filtration accepts Irrigation Productsâ€™ offer, the facilities used to manufacture filters could be used to produce refrigerator filtration units. Revenues from the sale of
refrigerator filtration units are estimated at $48,000, with variable costs amounting to 50% of sales. In addition, $1 per unit of the fixed overhead associated with the manufacture of secondary water irrigation filters could be eliminated.

Required:
Should Filtration, Inc. accept Irrigation Product's offer?

Answers: 2

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Filtration, Inc. manufactures filters for use in secondary water irrigation systems. The costs per u...