Question
Sunrise Manufacturing is considering outsourcing a component of its production process. The company currently produces the component in-house at a variable cost of $15 per
Sunrise Manufacturing is considering outsourcing a component of its production process. The company currently produces the component in-house at a variable cost of $15 per unit and incurs fixed costs of $20,000 per month. An external supplier has offered to provide the component at a price of $18 per unit. If Sunrise Manufacturing anticipates a decrease in fixed costs by outsourcing, calculate the minimum quantity of units that should be outsourced to achieve cost savings. Discuss any other factors that Sunrise Manufacturing should consider before making a decision.
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