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Zaman Co. is now producing Product X. The companys accounting department reports the following costs of producing 50,000 units of the product X each year:
Zaman Co. is now producing Product X. The companys accounting department reports the following costs of producing 50,000 units of the product X each year:
Direct Materials $2
Direct Labor $1
Variable Overhead $1
Fixed cost $ 1.75* (Expected 50% will save if the company will buy from the outside supplier)
An outside supplier from China offered to sell 50,000 units to Zaman Co. at a price of only $5 each.
Instructions:
Should the company stop producing the product X internally or buy them from the outside supplier? (show your calculation)
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