Doro Fill Company Fabricates Inexpensive Automobiles for Sale to 3^rd

question 28

True/False

Doro Fill Company fabricates inexpensive automobiles for sale to 3^rd world countries. Each auto includes one wiring harness, which is currently made in-house. Details of the harness fabrication are as follows:
$$\begin{array} { | l | c | r|} \hline \text { Volume } & 800 &\text { units per month } \\\hline \text { Variable cost per unit } & \$ 7& \text { per unit } \\\hline \text { Fixed costs } & \$ 15,000 &\text { per month } \\\hline\end{array}$$
A factory in Indonesia has offered to supply Dora Fill with ready-made units for a price of $10 each. Assume that Doro Fill's fixed costs are unavoidable, but the company could use the vacated production facilities to earn an additional $5,000 of profit per month. In order to maximize operating income, Doro Fill should outsource.

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Definitions:

Probability Distribution

A statistical function that describes all the possible values and likelihoods that a random variable can take within a given range.

Reservation Price

The highest price a person is prepared to spend on a product or service.

English Auction

A bidding process where the price ascends and the highest bid wins, commonly used in auction houses and online marketplaces.

Willingness To Pay

The maximum amount an individual is prepared to spend on a good or service, reflecting the perceived value.