Victoria Technologies Makes a Part Used in the Manufacture of Digital

question 179

Essay

Victoria Technologies makes a part used in the manufacture of digital cameras. Management is
considering whether to continue manufacturing the part, or to buy the part from an outside source at a cost of $24.00 per part. Victoria Technologies needs 60,000 parts per year. The cost of manufacturing 60,000 parts is computed as follows:

If Victoria Technologies buys the part, it would pay $.60 per unit to transport the parts to its manufacturing plant. Purchasing the part from an outside source would enable the company to avoid 50% of fixed manufacturing overhead costs. Victoria Technologies' factory space freed up by purchasing the part from an outside supplier could be used to manufacture another product with a contribution margin of $70,000.
Prepare an analysis to show which alternative makes the best use of Victoria Technologies' factory space:1)Make the part
2)Buy the part and leave facilities idle
3)Buy the part and use facilities to make another product

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Definitions:

Depressants

Substances that reduce the activity of the central nervous system, often used to induce calmness, reduce anxiety, or promote sleep.

Reduced Anxiety

A state or condition in which feelings of worry, nervousness, or unease are diminished or less intense.

Think-Drink Effect

The phenomenon where an individual's expectations about the effects of alcohol influence their perception of their own intoxication levels.

Beverage Marketers

Professionals involved in promoting and selling drinks, including soft drinks, alcoholic beverages, and other consumable liquids.