Question
14.A company produces 100 microwave ovens per month, each of which includes one electrical circuit. The company currently manufactures the circuit in-house but is considering
14.A company produces 100 microwave ovens per month, each of which includes one electrical circuit. The company currently manufactures the circuit in-house but is considering outsourcing the circuits at a contract price of $30 each. Currently, the cost of producing circuits in-house includes variable costs of $28 per circuit and fixed costs of $5,000 per month. The controller says that they could outsource production of the circuit, and then as long as they could get fixed cost reductions greater than $200 per month, it would improve earnings. a) Is his statement true or false? b) Justify your answer with calculations
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