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Spahr Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 5,000 units, are as follows:

Direct materials	$2.00
Direct labor	$4.00
Variable manufacturing overhead	$3.00
Fixed manufacturing overhead	$3.00
Total cost	$12.00
The fixed overhead costs are unavoidable.

Erickson Company has offered to sell 5,000 units of the same part to Spahr Company for $11 per unit. Assuming the company has no other use for its facilities, what should Spahr Company do?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9966358

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