Bancroft Currently Manufactures a Subcomponent That Is Used in Its

question 32

Essay

Bancroft currently manufactures a subcomponent that is used in its main product. A supplier has offered to supply all the subcomponents needed at a price of $240. Bancroft currently produces 20,000 subcomponents at the following manufacturing costs: a. If Bancroft has no alternative uses for the manufacturing capacity, what would be the profit impact of buying the subcomponents from the supplier?
b. If Bancroft has no alternative uses for the manufacturing capacity, what would be the maximum price per unit they would be willing to pay the supplier?
c. Now assume Bancroft would avoid $640,000 in equipment leases and salaries if the subcomponent were purchased from the supplier. Now what would be the profit impact of buying from the supplier?

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Definitions:

Customer Cost Analysis

An evaluation process to determine the total cost associated with acquiring and maintaining a customer over time.

Customer Support Department

A specialized unit within a company that handles inquiries, complaints, and other interactions with customers to facilitate satisfaction and resolve issues.

Time-Driven Activity-Based Costing

An accounting method that assigns costs to products or services based on the actual time activities consume, improving accuracy in costing.

Capacity Analysis

A technique used to determine the production capacity needed by an organization to meet changing demands for its products.