For Many Years, Condor Company Has Produced a Small Part

question 51

Essay

For many years, Condor Company has produced a small part that it uses in the production of its standard line of equipment. The company's cost of producing one part, based on a production level of 50 000 parts per year, is:
An outside supplier has offered to supply the part to Condor for $29 per part. Condor has determined that 40% of the fixed overhead represents salaries and other costs which can be eliminated if the parts are purchased.
Required:
Prepare an analysis to determine whether Condor should accept the supplier's offer.

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Definitions:

Infrastructure

Refers to the basic physical and organizational structures and facilities (e.g., buildings, roads, power supplies) needed for the operation of a society or enterprise.

Usage

The manner and frequency with which a product or service is used by consumers.

Operational Decision

A choice made in the day-to-day functioning of a company that affects how tasks and activities are performed.

Transportation

The movement of goods from one location to another, which can influence cost, efficiency, and delivery times in the supply chain.