Transformation Motor Company Produces a Part That Is Used in the Manufacture

question 98

Essay

Transformation Motor Company produces a part that is used in the manufacture of one of its products.The unit manufacturing costs of this part,assuming a production level of 6,000 units,are as follows:
$\begin{array}{ll}\text { Direct materials } & \$ 5 \\\text { Direct labor (variable cost) } & 6 \\\text { Variable manufacturing overhead } & 3 \\\text { Fixed manufacturing overhead } & \underline{4} \\\text { Total cost } & \$ 18\end{array}$ Alba Motors Company has offered to sell 6,000 units of the same part to Transformation for $17.50 per unit.Assuming the company has no other use for its facilities and that the fixed manufacturing costs are unavoidable,what should Transformation do?

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Definitions:

Linking Pins

Represent individuals or entities that connect different groups or levels within an organization, facilitating communication and coordination.

Interlocking Networks

A concept in organizational theory where multiple members of a board of directors serve on the boards of multiple corporations, often leading to high levels of connectivity and potential conflicts of interest.

Empowerment

What enables others to gain and use decision-making power.

Face-to-face Interaction Techniques

Methods used to facilitate direct, personal communication between individuals, often to improve understanding or resolve conflict.