Senior Company Currently Buys 35,000 Units of a Part Used

question 31

Essay

Senior Company currently buys 35,000 units of a part used to manufacture its product at $40 per unit. Recently the supplier informed Senior Company that a 20 percent increase will take effect next year. Senior has some additional space and could produce the units for the following per-unit costs (based on 35,000 units):
If the units are purchased from the supplier, $200,000 of fixed costs will continue to be incurred. In addition, the plant can be rented out for $20,000 per year if the parts are purchased externally.
Required:
Should Senior Company buy the part externally or make it internally?

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Definitions:

Happiness

A state of well-being and contentment characterized by positive emotions ranging from satisfaction to intense joy.

Right Livelihood

A concept from Buddhist teachings that refers to ethical and moral employment, ensuring one's work does no harm and contributes positively to society.

Secondary Education

The stage of education that follows primary education, typically including high school or equivalent levels.

Career Exploration

The process of researching, evaluating, and learning about various occupational opportunities to find a match for one’s interests and abilities.