Sitro, LTD had been making a component for one of its products, but is now considering outsourcing

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Sitro, LTD had been making a component for one of its products, but is now considering outsourcing the component to a Chinese company, which has offered to sell an unlimited quantity of components for \($6\) per unit. If Sitro outsources, it could shut down a whole department and rent the building for \($2,000\) per month. The cost of making the component is \($5\) per unit, which includes \($1.50\) of fixed costs, of which only \($1.00\) per unit can be avoided if the department is shut down. Sitro currently produces about 1,000 units per month. What is the cost advantage or disadvantage of per unit of outsourcing the component?

A)\($1.00\) disadvantage B)\($1.50\) disadvantage C)\($1.00\) advantage D)os \($0.50\) advantage

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Managerial Accounting

ISBN: 9781618532350

8th Edition

Authors: Morse Hartgraves

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