AMA

AMA

20. purchase costly 10,000. Met benefit in purchasing 1.000 ton 12:5is a multiple produd manufacturer One product line consists of moton and 69 company produces three different model. Sis currently considering a proposal from a supplier who wants to sell the company blades for the motors line. The company currently produces all the blades it required. In order to meet customer's needs Scurrently produces three different blades for each motor model (nine different blades). The suppliers would charge 25 per blade, regardless of blade type. For the next year Shas projected the costs of its own blade production as follows 9 based on projected volume of 10,000 units) 75.000 65.000 255.000 Direct materials Direct labour Variable overhead Fred Overhead factory supervision Other feed.com Total production costs 35.000 65.000 t2.95.000 Assume 1. The equipment utilized to produce the blades has no alternative use and no market value 2. The space occupied by blade production will remain idle if the company purchases rather than makes the blades, and Factory supervision costs reflects the salary of a production supervisor who would be dismissed from the firm if blade production ceased. Determine the net profit or loss of purchasing (rather than manufacturing the blades required for motor production in the next year. Determine the love of motor peduction where would be indifferent between buying and producing the blades. If the future volume level were predicted to decrease, would that influence the decision? For this part only, assume that the space presently occupied by blade production beleased to another form for 45.000 per year. How would this affect the main or buy decision