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Kaiwen, Inc. is considering whether to make hard drives for its computers internally or to buy them from an outside supplier. The annual production data
Kaiwen, Inc. is considering whether to make hard drives for its computers internally or to buy them from an outside supplier. The annual production data for Kaiwen in making 50,000 hard drives per yea allows: Kaiwen has been negotiating with an outside supplier to provide hard drives. After several discussions, the supplier has agreed to a price of $50 per unit. The agreement includes a four year contract with a minimum of 50,000 units per year. If Kaiwen outsources the production of hard drives, the fixed MOH costs will be unavoidable. Assume that the quality of hard drives will be the same. By how much would their profits change per year if they outsource production of the hard drive? In your answer, include whether their profit will be increasing or decreasing. Assume that Kaiwen will save an additional $320,000 per year by discontinuing the lease of the factory after outsourcing. By how much would their profits change per year if they outsource production of the hard drive
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