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A division currently manufactures 1 0 0 0 0 components per annum. The costs are as follows: A supplier has offered to supply 1 0
A division currently manufactures components per annum.
The costs are as follows:
A supplier has offered to supply components per annum at a price
of per unit for a minimum of years.
If the components are outsourced the direct labour will be made
redundant.
Direct materials and variable overheads are avoidable and fixed
manufacturing overhead would be reduced by per annum but
nonmanufacturing costs would remain unchanged.
The capacity has no alternative uses. Required : sould the company accept the offer?
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