Cranberry Cross Co

question 35

Essay

Cranberry Cross Co. (CCC) is currently purchasing components from an outside supplier for $75 per unit. Because of supplier reliability problems, the company is considering producing the component internally in a currently idle manufacturing plant. Annual volume over the next six years is expected to total 200,000 units at variable manufacturing costs of $60 per unit.
CCC must acquire $60,000 of new equipment if it reopens the plant. The equipment has a five-year service life and a $10,000 salvage value, and will be depreciated by the straight-line method. Repairs and maintenance are expected to average $3,000 per year in years 3-5, and the equipment will be sold at the end of its life. The hurdle rate is 10%.
Required:
Use the net-present-value method (total-cost approach) and determine whether CCC should make or buy the component. Ignore income taxes.

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Definitions:

Women

Refers to adult human females, often discussed within various sociocultural, political, and health-related contexts.

Men

Adult human males, distinguished biologically by XY chromosomes, typically producing male hormones and secondary sexual characteristics.

Neurocognitive Disorders

A category of mental health disorders that primarily affect cognitive abilities including learning, memory, perception, and problem-solving.

Pseudo-dementia

A condition that mimics the symptoms of dementia but is actually caused by other psychiatric disorders, such as depression.