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Acc – climate-control, inc., manufactures a variety of heating and


Climate-Control, Inc., manufactures a variety of heating and air conditioning units.  The company is currently manufacturing all of its own component parts.  An outside supplier has offered to sell a theromostat to Climate-Control for $20 per unit.  To evaluate this offer, Climate-Control, Inc., has gathered the following information relating to its own cost of producing the thermostat internally:            
         Per Units Per  
         Unit Year  
Direct materials        $6  $90,000   
 Direct labor        8  120,000   
 Variable manufacturing overhead        1  15,000   
 Fixed manufacturing overhead, traceable ***        5  75,000   
 Fixed mfg. overhead, common, and allocated        10  150,000   
  Total cost       $30  $450,000  300000 $150,000
 *** 40% supervisory salaries; 60% depreciation of special equipment (no resale value).          
1.Assuming that the company has no alternative use for the facilities now being used to produce the thermostst, should the outside supplier’s offer be accepted? 
2.Suppose that if the thermostats were purchased, Climate-Control, Inc., could use the freed capacity to launch a new product.  The segment margin of the new product would be $65,000 per year.  Should Climate-Control, Inc., accept the offer to buy the thermostats from the outside supplier for $20 each?          


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