Archer Currently Manufactures a Subcomponent That Is Used in Its

question 75

Essay

Archer 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 $42. Archer currently produces 100,000 subcomponents at the following manufacturing costs: a. If Archer has no alternative uses for the manufacturing capacity, what would be the profit impact of buying the subcomponents from the supplier?
b. If Archer 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 Archer would avoid $150,000 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?

---

Definitions:

Motor Units

Functional units of a muscle that consist of a motor neuron and all the muscle fibers it innervates.

Gastrocnemius Muscles

A major calf muscle that is involved in walking, running, and jumping by flexing the foot at the ankle.

Soleus Muscles

A powerful muscle in the back part of the lower leg (calf) that is involved in standing and walking.

Plantar Flexion

The movement that decreases the angle between the sole of the foot and the back of the leg, as seen when pointing the toes.