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Assume that a compary makes 30,000 units of Part A each year. At this level of production, the company's occounting system reports the following cost
Assume that a compary makes 30,000 units of Part A each year. At this level of production, the company's occounting system reports the following cost per unit: An outside tupplier has offered to sell the company 30,000 parts per year for a price of $33 per part. The company believes that $160,000 of the foxed manufacturing overhead cost being allocated to this part will continue to be incurred even if the part is purchased from the outside supplier; Furthermore, If the company accepts the supplief's offer, it will free-up 15,000 minutes of production time within a machining work station that is the cornpany's constraining resource. The company could use all of these minutes to produce additional units of another product that requires 10 machining minutes per unit and that earns a contribution margin per unit of $16. What is the financial advantage (disadvantage) of buying the parts from the outside supplier? Mutais choice 14,040 5.4400 594,000 Multiple Choice $14,000 5(34,000) $94,000 534,000
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