Fields Company Currently Manufactures One of Its Parts at a Cost

question 47

Essay

Fields Company currently manufactures one of its parts at a cost of $3.25 per unit. This cost is based on a normal production rate of 50,000 units. Variable costs are $2.10 per unit, fixed costs related to making this part are $40,000 per year, and allocated fixed costs are $45,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Fields is considering buying the part from a supplier for a quoted price of $2.80 per unit guaranteed for a three-year period. Should the company continue to manufacture the part, or should it buy the part from the outside supplier? Support your answer with analyses.

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Definitions:

Bulimia Nervosa

An eating disorder characterized by periods of binge eating followed by purging, fasting, or excessive exercise to prevent weight gain.

Electrolytes

Minerals in the body that have an electric charge, crucial for maintaining fluid balance, muscle contraction, and nerve function.

Bulimia Nervosa

An eating disorder characterized by recurrent and frequent episodes of eating unusually large amounts of food followed by behavior that compensates for the binge, such as self-induced vomiting.

Binge-Eating Disorder

A severe, life-threatening, and treatable eating disorder characterized by recurrent episodes of eating large quantities of food, often quickly and to the point of discomfort.