Mountaineer, Inc. currently makes 6,000 pairs of weatherproof hiking boots each year. The boots sell for $119. Mountaineer has been manufacturing the boots and applying the weatherproofing as the final process before packaging. However, the company is concerned about the costs associated with the weatherproofing process. The company is concerned that the EPA will not approve of their disposal of the residue from the process, resulting in heavy monetary penalties. Mountaineer has found a manufacturing company that can waterproof the boots and package them at a cost of $18 each. If the company outsources the waterproofing and packaging of the boots, its insurance premiums will be reduced. Mountaineer's standard cost of the waterproofing and packaging process for one unit is listed below.
| Direct material ($1 for waterproofing and $4 for packaging) | $ 5 |
| Direct labor (waterproofing and packaging by a single employee) | 3 |
| Variable overhead ($6 for waterproofing and $2 for packaging) | 8 |
| Direct fixed overhead (Insurance) | 6 |
| Non-differential fixed overhead | 8 |
| Total unit cost | $30 |
Required:
Should Barber outsource the waterproofing and packaging? Why?
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