Dipuisto Inc. manufactures radios at an annual
17. Dipuisto Inc. manufactures radios at an annual production level of 50,000 units. At this production level, the
cost per unit for a radio is as follows: Direct materials $2.10
Direct labor $3 .70
Valiable manufacturing overhead $8.40
Supervisor’s salary $6.65
Fixed manufactuling overhead $9.15
Total cost: $30.00 An outside supplier has offered to sell the radios to Dipuisto Inc. for $26.20 per unit. If Dipuisto Inc. accepts this
offer, then they will not need to employ the supervisor. Also, if the radios are purchased from the outside supplier,
then 40% of the ?xed manufacturing overhead costs can be eliminated. Assuming that there are no other uses for the
facility space that Dipuisto uses to manufacture the radios, what is the annual impact to the company’s pro?t if it
buys the radios from the supplier instead of manufacturing them? Pro?t would decrease by $84,500 Pro?t would increase by $84,5 00 Pro?t would decrease by $ 190,000 Pro?t would increase by $190,000 {1-0 ergo

Dipuisto Inc. manufactures radios at an annual
17. Dipuisto Inc. manufactures radios at an annual production level of 50,000 units. At this production level, the
cost per unit for a radio is as follows: Direct materials $2.10
Direct labor $3 .70
Valiable manufacturing overhead $8.40
Supervisor’s salary $6.65
Fixed manufactuling overhead $9.15
Total cost: $30.00 An outside supplier has offered to sell the radios to Dipuisto Inc. for $26.20 per unit. If Dipuisto Inc. accepts this
offer, then they will not need to employ the supervisor. Also, if the radios are purchased from the outside supplier,
then 40% of the ?xed manufacturing overhead costs can be eliminated. Assuming that there are no other uses for the
facility space that Dipuisto uses to manufacture the radios, what is the annual impact to the company’s pro?t if it
buys the radios from the supplier instead of manufacturing them? Pro?t would decrease by $84,500 Pro?t would increase by $84,5 00 Pro?t would decrease by $ 190,000 Pro?t would increase by $190,000 {1-0 ergo