Plainfield Company manufactures Part G for use in its production cycle. The costs per unit for 10,000 units of Part G are as follows:
- Direct materials: $3
- Direct labor: $15
- Variable overhead: $6
- Fixed overhead: $8
Verona Company has offered to sell Plainfield 10,000 units of Part G for $30 per unit. If Plainfield accepts Verona’s offer, the released facilities could be used to save $45,000 in relevant costs in the manufacture of Part H.