Victory Electronics makes a part used in the manufacture of desktop computers. Management is considering whether to continue manufacturing the part, or to buy the part from an outside source at a cost of $27.00 per part. Victory Electronics needs 80,000 parts per year. The cost of manufacturing 80,000 parts is computed as follows:
| Variable manufacturing overhead | 525,000 |
| Fixed manufacturing overhead | 650,000 |
| Total manufacturing costs | $2,525,000 |
If Victory Electronics buys the part, it would pay $.40 per unit to transport the parts to its manufacturing plant. Purchasing the part from an outside source would enable the company to avoid 40% of fixed manufacturing overhead costs. Victory Electronics's factory space freed up by purchasing the part from an outside supplier could be used to manufacture another product with a contribution margin of $65,000.
Prepare an analysis to show which alternative makes the best use of Victory Electronics's factory space:
| 2. | Buy the part and leave facilities idle. |
| 3. | Buy the part and use facilities to make another product. |
Biology Is Studied at Many Levels of Organization (Part 1)
Map These Genes (Part 1)
Map These Genes (Part 3)
Part C - Structure and function of the human brain
The oil pump is the only part in an engine that gets unfiltered engine oil. The oil is drawn up ...
Nike (Victory) of Samothrace