Make or Buy

Essay

Make or buy.Towson,Inc. ,produces semiconductors of which part no.200 is a subassembly.Towson,Inc. ,currently produces part no.200 in its own shop.The Baltic Company offers to supply it at a cost of $205 per 500 units.An analysis of the costs Towson incurs producing part no.200 reveals the following information:

Required:
Management of Towson,Inc. ,needs your advice in answering the following questions:
a.Should Towson,Inc. ,accept the offer from Baltic if Towson's plant is operating well below capacity?
b.Should the offer be accepted if Baltic reduces the price to $170 per 500 units?
c.Suppose Towson can find other profitable uses for the facilities that it now uses in turning out part no.200.How would that fact affect the price Towson is willing to pay Baltic?
(Towson,Inc. ;make or buy. )