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Scenario For many years Margarita Joe Company has purchased the starters that it installs in its standard line of farm tractors. Due to a reduction
Scenario For many years Margarita Joe Company has purchased the starters that it installs in its standard line of farm tractors. Due to a reduction in output of certain of its products, the company has idle capacity that could be used to produce the starters. The chief engineer has recommended against this move, however, pointing out that the cost to produce the starters (detailed below) would be greater than the current $8.40 per unit purchase price: Cost to produce the starters The above supervisor would have to be hired to oversee production of the starters. But the company has sufficient idle tools and machinery that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant (total rent is $80,000 per period). Question Prepare computations to show the dollar advantage or disadvantage per period of making the starters. For each cost, provide a very brief explanation why it should or should not be considered for the make vs. buy decision. Note: The correct answer should be typed into the space provided. You must also show your work that illustrates how you arrived at your answer by using the Insert menu option. Then, choose the appropriate option for the media you wish to upload for proof of your work
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