Kramer Company Makes 4,000 Units Per Year of a Part

question 23

Essay

Kramer Company makes 4,000 units per year of a part called an axial tap for use in one of its products. Data concerning the unit production costs of the axial tap follow: An outside supplier has offered to sell Kramer Company all of the axial taps it requires. If Kramer Company decided to discontinue making the axial taps, 40% of the above fixed manufacturing overhead costs could be avoided. Assume that direct labor is a variable cost.
Required:
a. Assume Kramer Company has no alternative use for the facilities presently devoted to production of the axial taps. If the outside supplier offers to sell the axial taps for $65 each, should Kramer Company accept the offer? Fully support your answer with appropriate calculations.
b. Assume that Kramer Company could use the facilities presently devoted to production of the axial taps to expand production of another product that would yield an additional contribution margin of $80,000 annually. What is the maximum price Kramer Company should be willing to pay the outside supplier for axial taps?

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Definitions:

Gender Schemas

Cognitive structures that reflect the cultural beliefs and values about what it means to be male or female in society.

Spermarche

The onset of the ability to ejaculate sperm in boys, marking a significant milestone in male puberty.

Secondary Sex Characteristics

Secondary sex characteristics are physical traits that emerge during puberty but are not directly involved in reproduction, such as breast development in females and facial hair in males.

Gender Identity

An individual's personal sense of their gender, which may or may not correspond to the sex assigned at birth.