Senior Company Currently Buys 30,000 Units of a Part Used

question 125

Essay

Senior Company currently buys 30,000 units of a part used to manufacture its product at $40 per unit.Recently the supplier informed Senior Company that a 20% increase will take effect next year.Senior has some additional space and could produce the units for the following per-unit costs (based on 30,000 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?
$\begin{array}{lr}\text { Direct materials } & \$ 16 \\\text { Direct labour } & 12 \\\text { Variable overhead } & 12 \\\text { Fixed overhead } & 10 \\\text { Total } & \$ 50\end{array}$

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Definitions:

Repolarization

The process of restoring the negative charge inside a neuron or muscle cell after depolarization, preparing it for another action potential.

Electric Signals

are impulses of charged particles, such as ions, used by neurons and other cells to communicate and perform physiological functions.

Cell Body

The part of a neuron that contains the nucleus and most of the cytoplasm and organelles, serving as the metabolic center.

Neuron Cell Bodies

The part of a neuron that contains the cell nucleus and is responsible for maintaining the life of the cell and initiating neural signals.