Hanson Inc

question 100

Essay

Hanson Inc. , makes 1, 000 units per year of a part called a prositron for use in one of its products.Data concerning the unit production costs of the prositron follow: An outside supplier has offered to sell Hanson, Inc.all of the prositrons it requires.If Hanson, Inc.decided to discontinue making the prositrons, 10% of the above fixed manufacturing overhead costs could be avoided.
Required:
a.Assume Hanson, Inc.has no alternative use for the facilities presently devoted to production of the prositrons.If the outside supplier offers to sell the prositrons for $850 each, should Hanson, Inc.accept the offer? Fully support your answer with appropriate calculations.
b.Assume that Hanson, Inc.could use the facilities presently devoted to production of the prositrons to expand production of another product that would yield an additional contribution margin of $50, 000 annually.What is the maximum price Hanson, Inc.should be willing to pay the outside supplier for prositrons?

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Definitions:

Superior Portion

Refers to the upper part of a structure or organ in the body, relative to other components.

Basal Nucleus

A group of neurons located deep within the cerebral hemisphere, involved in the regulation of voluntary motor movements and procedural learning.

Cerebrum

The largest part of the brain, responsible for voluntary activities, sensory perception, thought, reasoning, and memory.

Caudate Nucleus

A structure within the brain involved in various processes such as voluntary movement coordination and learning.