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Enthusiastic Products Is Deciding Whether to Outsource Production of a Certain

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Essay

Enthusiastic Products is deciding whether to outsource production of a certain component that is included in all of its products. It currently costs Enthusiastic Products $1.20 to make each component in-house. If Enthusiastic Products outsources, it can buy the component ready-made for $0.90 each, and can shut down the production facilities it is currently using to manufacture the component, and save $20,000 a year in fixed costs. Annual requirement for the component is 12,000 units. What is the effect of outsourcing?


Definitions:

Fluid Pressure

The pressure exerted by a fluid, either a liquid or a gas, which plays a critical role in various geological processes like oil migration and faulting.

Compression

The process or result of applying force to something that causes it to become squeezed or compacted, often leading to a decrease in volume.

Tension

A force that stretches something, making it tight or the state of being stretched tight.

Test Anxiety

A form of anxiety experienced before or during test situations, often affecting performance.

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