Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Numbers are wrong. please fix Racer Industries is currently purchasing Part No. 76 from an outside supplier for $84 per unit. Because of supplier reliability
Numbers are wrong. please fix
Racer Industries is currently purchasing Part No. 76 from an outside supplier for $84 per unit. Because of supplier reliability problems, the company is considering producing the part internally in an idle manufacturing plant. Annual volume over the next 6 years is expected to total 296,000 units at variable manufacturing costs of $79 per unit. Racer must acquire $84,000 of new equipment if it reopens the plant. The equipment has a 6 -year service life, a $14,400 salvage value, and will be depreciated by the straight-line method. Repairs and maintenance are expected to average $5,600 per year in years 4-6, and the equipment will be sold at the end of its life. Required: Use the net-present-value method (total-cost approach) and a 14\% hurdle rate to determine whether Racer should make or buy Part No. 76. Ignore income taxes. (Negative amounts should be indicated by a minus sign. Round your answers to the nearest dollar amount.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started