Solved

Senior Company Currently Buys 35,000 Units of a Part Used

Question 31

Essay

Senior Company currently buys 35,000 units of a part used to manufacture its product at $40 per unit. Recently the supplier informed Senior Company that a 20 percent increase will take effect next year. Senior has some additional space and could produce the units for the following per-unit costs (based on 35,000 units):
Senior Company currently buys 35,000 units of a part used to manufacture its product at $40 per unit. Recently the supplier informed Senior Company that a 20 percent increase will take effect next year. Senior has some additional space and could produce the units for the following per-unit costs (based on 35,000 units): If the units are purchased from the supplier, $200,000 of fixed costs will continue to be incurred. In addition, the plant can be rented out for $20,000 per year if the parts are purchased externally. Required: Should Senior Company buy the part externally or make it internally? If the units are purchased from the supplier, $200,000 of fixed costs will continue to be incurred. In addition, the plant can be rented out for $20,000 per year if the parts are purchased externally.
Required:
Should Senior Company buy the part externally or make it internally?

Correct Answer:

verifed

Verified

Produce internally; ...

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Q1: Firms may be asked to accept a

Q5: Describe the steps in the decision-making process.

Q29: Information about three joint products follows: <img

Q30: The operations of California Corporation are divided

Q36: Figure 17-2 Wannabee Company manufactures a product

Q45: The activity resource usage model focuses on

Q64: Relevant costs and revenues are present costs

Q68: The last of the six steps of

Q74: Which of the following is NOT a

Q114: How is understanding of committed resources and