Calculate the net advantage to hp of outsourcing

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Assume a division of HP Inc. currently makes 50,000 circuit boards per year used in producing diagnostic electronic instruments at a cost of $50 per board, consisting of variable costs per unit of $35 and fixed costs per unit of $15. Further assume Sanmina Corporation offers to sell HP the 50,000 circuit boards for $50 each. If HP accepts this offer, the facilities currently used to make the boards could be rented to one of HP's suppliers for $75,000 per year. In addition, $8 per unit of the fixed overhead applied to the circuit boards would be totally eliminated.

Problem 1: Should HP outsource this component from Sanmina Corporation?

Problem 2: Calculate the net advantage (disadvantage) to HP of outsourcing the component from Samina Corporation. Use a negative sign with your answer to indicate a net disadvantage for outsourcing, if appropriate.

Reference no: EM132707230

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