<u>Solution and Explanation:</u>
<u>Part a: </u>                                                                             
 Revenue  5000 multiply 6.6  	33000            
 Unit Level Variable Cost:        
 Material Cost  5000 multiply 2.7  	-13500    
 Labor Cost  5000 multiply 1.2  	-6000    
 Manufacturing Cost  5000 multiply 1.2  	-6000    
 Shipping and Handling  5000 multiply 0.3  	-1500    
 Sales Commission    0    
 Contribution Margin    6000            
 Should be accepted as it will increase profitability by $6000          	
Part b1&b2:                                 Cost to Make  Cost to Buy          	
 Material Cost                40000*2.7  108000      
 Labor Cost                40000*1.2  48000      
 Manufacturing Cost  40000*1.2  48000      
 Prod Supervisor Salary             72000      
 Purchase Cost  40000*6.72               0  268800          	
 Total Cost                               276000  268800          
 Should purchase from outside as cost is lower than making it      
Part b3:        
                                           Cost to Make  Cost to Buy            
 Material Cost  60000 multiply 2.7     162000      
 Labor Cost  60000 multiply1.2             72000      
 Manufacturing Cost  60000*1.2  72000      
 Prod Supervisor Salary             72000        72000    
 Purchase Cost  60000*6.72              0          	403200            
 Total Cost                             378000        475200            
 Should make in house as cost is lower            
Part c:  It should not be eliminated.              
 Elimination will decrease profitability by $72000 which is being allocated company wide facility exp.  Before Allocation, actual profit is (168000-24000-72000)=$72000    	
 Loss is because of allocation of facility expenese, which will be allocated on other segment.