Jordan Company Manufactures a Part for Its Production Cycle The Jordan Company Has Been Approached by a Supplier Who

question 16

Essay

Jordan Company manufactures a part for its production cycle. The costs per unit for 20,000 units of this part are as follows: $$\begin{array} { l l } \text { Direct materials } & \$ 15 \\\text { Direct labor } & 12 \\\text { Variable factory overhead } & 20 \\\text { Unavoidable fixed factory overhead } & \underline { 18 } \\\text { Total cost } & \underline { \$ 65 }\end{array}$$ The Jordan Company has been approached by a supplier who claims it can sell Jordan Company 20,000 units of the same part for $940,000.
Required:
a. Assuming there is no alternative use for the facilities, how much money would Jordan Company save by buying the part?
b. Assuming the facilities can be rented out for $10,000 per year, should Jordan Company buy the part, and if so, how much money would be saved?
c. Are there any other factors Jordan Company should consider?

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Definitions:

Circulatory System

The body system consisting of the heart, blood vessels, and blood, responsible for transporting nutrients, oxygen, and hormones to cells and removing metabolic wastes.

Digestive System

The system in the body responsible for processing food, absorbing nutrients, and eliminating waste.

Increase Insulin

Refers to actions or treatments aimed at raising the levels of insulin, a hormone regulating blood sugar.

Decrease Antioxidants

The reduction in substances that can prevent or slow damage to cells caused by free radicals, often due to dietary changes or environmental factors.