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what is wrong with my numbers? Racer Industries is currently purchasing Part No. 76 from an outside supplier for $82 per unit. Because of supplier
what is wrong with my numbers?
Racer Industries is currently purchasing Part No. 76 from an outside supplier for $82 per unit. Because of supplier reliablity 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 298,000 units at variable manufacturing costs of $77 per unit. Racer must acquire $82,000 of new equipment if it reopens the plant. The equipment has a 6 -year service life, a $14,200 salvage value, and will be depreciated by the straight-line method. Repairs and maintenance are expected to average $5,400 per year in years 46, and the equipment will be sold at the end of its life. Required: Use the net-present-value method (total-cost approach) and a 15% 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
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