Orbital Communications, Inc. manufactures communications satellites used in TV signal transmission. The firm currently purchases one component
Question:
Orbital Communications, Inc. manufactures communications satellites used in TV signal transmission. ‘The firm currently purchases one component for its satellites from a European firm. An Orbital Communications engineering team has found a way to use the company’s own component, part number A200, instead of the European component. However, the Orbital Communications component must be modified at a cost of $500 per part. The European component costs $8,900 per pail. Orbital Communications’ part number A200 costs $5,100 before it is modified. Orbital Communications currently uses 10 of the European components per year.
Required:
Calculate the annual differential cost between Orbital Communications’ two production alternatives.
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