Harris Company Currently Produces a Component That It Uses in Making

question 114

Essay

Harris Company currently produces a component that it uses in making some of its products. Harris has calculated the following costs for making the part: $$\begin{array} { | l | r | } \hline \text { Unit-level costs } & \\\hline \text { Materials } & \$ 20 \\\hline \text { Labor } & 28 \\\hline \text { Overhead } & 2 \\\hline \text { Allocated facility-level costs } & 10 \\\hline \text { Total cost } & \$ 60 \\\hline\end{array}$$
Harris is considering outsourcing the component. A supplier has offered to sell the component to Harris for $52 each. Harris needs 8,000 units each year.
Required:
Should Harris outsource the component? Support your answer with appropriate computations.

---

Definitions:

Vagina

The muscular tube leading from the external genitals to the cervix of the uterus in women and most female mammals.

Ovarian Ligament

A fibrous ligament that connects the ovary to the lateral surface of the uterus.

Broad Ligament

A wide, flat sheet of peritoneum that supports the uterus, fallopian tubes, and ovaries within the pelvic cavity.

Suspensory Ligament

A fibrous tissue that supports an organ or structure, such as the lens of the eye or the penis.