Jeff Company Produces a Part That Is Used in the Manufacture

question 84

Essay

Jeff Company produces a part that is used in the manufacture of one of its products.The annual costs associated with the production of 11,000 units of this part are as follows:
A supplier is willing to sell 11,000 units of the part to Jeff Company for $12.50 per unit.When examining the indirect production costsfixed,Jeff Company determines $10,000 is avoidable.
Required:
A)If there are no alternative uses for the facilities,should Jeff Company take advantage of the supplier's offer?
B)If Jeff Company decides to buy the part from the supplier,Jeff Company can rent out the idle facilities for $50,000 per year.Should Jeff Company take advantage of the supplier's offer?

• A)If there are no alternative uses for the facilities,should Jeff Company take advantage of the supplier's offer?
• B)If Jeff Company decides to buy the part from the supplier,Jeff Company can rent out the idle facilities for $50,000 per year.Should Jeff Company take advantage of the supplier's offer?

---

Definitions:

Current Performance

The present level of achievement or output in a particular area or activity.

World-Class Companies

Businesses that are leaders in their respective industries or sectors, demonstrating excellence in quality, performance, and competitiveness on a global scale.

ISO Certification

A seal of approval from the International Organization for Standardization that indicates a company meets a set of defined standards for quality, safety, and efficiency.

Competitive Advantage

The attribute that allows an organization to outperform its rivals.