Hanson, Inc

question 31

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:

Ventral Posterior Nucleus

A thalamic nucleus that plays a key role in processing sensory information from the body.

Visual Impulses

Signals transmitted from the retina to the brain, allowing for the perception of sight.

Lateral Hemispheres

Regions of the cerebellum involved in planning, executing, and learning motor movements.

Fine Motor Coordination

The ability to use small muscles, particularly in the hands and fingers, precisely, often necessary for tasks like writing, typing, and manipulating small objects.