Foto Company makes 50,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows:
An outside supplier has offered to sell the company all of these parts it needs for $37.30 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $310,000 per year.If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $9.70 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.Required:a. How much of the unit product cost of $38.20 is relevant in the decision of whether to make or buy the part?b. What is the financial advantage (disadvantage) of purchasing the part rather than making it?c. What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 50,000 units required each year?
Definitions:
Part-Time Work
Employment characterized by fewer hours than a full-time position, often offering less job security and benefits, and allowing for flexibility in schedules.
Intersectional Research
A study approach that examines the intersections of gender, race, class, sexuality, and other social categories, understanding that these factors operate together to produce unique experiences of oppression and privilege.
Gender-Profiling
The practice of making assumptions or taking actions based on an individual's gender, often leading to stereotyping or discrimination.
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The communicative and relational dynamics that occur between students and their teachers within an educational setting.
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