Flameco, Inc. incurs a unit cost of $20 (unit variable cost of $16 and unit fixed cost of $4) to produce the electronic lighting switch in its outdoor propane fire pits. A supplier has offered to make 10,000 of the parts at a price per unit of $15. If this offer is accepted by Flameco, Inc., it will save all variable costs but no fixed costs. Should Flameco, Inc. outsource its production for this part or should it continue to insource the production? Show all computations.

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The Answer of Flameco, Inc. incurs a unit cost of $20 (unit variable cost of $16 and unit fixed cost of $4) to produce the electronic lighting switch in its outdoor propane fire pits. A supplier has offered to make 10,000 of the parts at a price per unit of $15. If this offer is accepted by Flameco, Inc., it will save all variable costs but no fixed costs. Should Flameco, Inc. outsource its production for this part or should it continue to insource the production? Show all computations.