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Sheridan Manufacturing Company currently manufactures a component used in one of its products. The annual production costs for 5,000 components are as follows. Material cost
Sheridan Manufacturing Company currently manufactures a component used in one of its products. The annual production costs for 5,000 components are as follows. Material cost - $5 per unit Labor cost $4 per unit Overhead - $1 per unit Batch-level cost $5,000 Product-level manager's salary $18,000 Allocated facility-level costs $12,000 An outside company has offered to supply 5,000 units of the component for 513 each. If the company outsources the component, it will be able to rent out the idle factory space for $1,000 per month but will not terminate the product manager. Required: a) Prepare a quantitative analysis that indicates whether the component should outsources. b) What qualitative factors should be considered in this decision
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