Each Year,Mother Company Purchases 8,000 Units of a Part That

question 101

Essay

Each year,Mother Company purchases 8,000 units of a part that it needs for production of its product.The supplier notified Mother Company that a price increase will take effect shortly,which will bring the price of the part to $25 per part.Mother Company is considering the use of idle facilities to produce the part.The annual production costs to produce the needed 8,000 parts are as follows:
The idle facilities could also be rented out at an annual rent of $99,000.All the fixed indirect production costs are avoidable.
Required:
Determine if Mother Company should buy the part or produce it internally.

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Definitions:

Self-Actualisation

The realization or fulfillment of one's talents and potentialities, considered as a drive or need present in everyone.

Psychological Contracts

An unwritten agreement between employees and employers regarding mutual expectations.

Performance-Outcome Contingencies

The relationship between the performance of specific actions and the resulting outcomes, emphasizing the role of rewards or consequences.

Expectancies

Beliefs about the likelihood of a particular outcome as a result of one's actions or behaviors.