(Solved): Problem 3 Sherman Manufacturing Company charremly manu factures a component used in one of its pro ...

Problem 3 Sherman Manufacturing Company charremly manu factures a component used in one of its products. The annual production costs for 10,000 components are as follows: Material Cost: $5 per unit Labor Cost: $4 per unit Overhead: $1 per unit Batch-level set up costs per year: $5,000 $1 8,000 Product Level manager's salary: Allocated facility level costs: $12,000 An outside company has offered to supply 10,000 units of the component for $12.50 each. If the company outsources the component, it will be able to rent out the idled factory space for $1,000 per month but will not terminate the product manager. Required: a. Which items are not relevant to this outsourcing decision? b. Identify any opportunity costs associated with this decision? c. Prepare a quantitative analysis that indicates whether the component should be outsourced. Should the component be outsourced?