Tapeo Company has always made its electronic components that go into their GPS systems in-house. Streeter Company has offered to supply these electronic components at a price of $38 each. Tapeo uses 18,000 units of these components each year. The cost per unit of this component is as follows:
Assume that 45% of Tapeo Company's fixed overhead would be eliminated if the electronic component was no longer produced in-house.
Required:
A. If Tapeo decided to purchase the electronic component from Streeter Company how much would its operating income increase or decrease?
B. Should Tapeo continue to make the electronic component or buy it from Streeter Company?
Definitions:
Submission Information
Details or data provided when submitting a document, application, or proposal for consideration.
Solicited Proposal
A proposal requested by a potential client or sponsor, often in response to a specific request or need.
RFP
RFP stands for Request for Proposal, a document issued by a company when it wants to buy a product or service and is inviting suppliers to bid.
Managing RFPs
The process of overseeing and coordinating the response to Requests for Proposals, which are formal solicitations for offers from suppliers or contractors.
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