Identify any opportunity costs associated with this decision

Assignment Help Financial Management

Reference no: EM131543802

A Company currently manufactures a certain part. The annual production costs for 5,000 parts are as follows:

Material Cost $5 per unit

Labor Cost $4 per unit

Overhead $1 per unit

Batch level set up costs for the year $5,000

Product level manager's salary $18,000

Allocated facility level costs $12,000

A supplier has offered to provide 5,000 units of the component for $13 each. If the company outsources the part production, it will be able to rent out the idled factory space for $1,000 per month and terminate the product manager.

Required: 1) Which costs are not relevant to this outsourcing decision? 2) Identify any opportunity costs associated with this decision. 3) Prepare a quantitative analysis that indicates whether the component should be outsourced. 4) What other factors that should be considered when you consider the make-buy-mix decision?

Reference no: EM131543802

Questions Cloud

The volatility of underlying asset is higher than otherwise : Will the value of the option be larger or smaller if the volatility of the underlying asset is higher than otherwise?

Calculate return on invested capital for each firm : Calculate the return on invested capital (ROIC) for each firm.

Analyze the most important contributions to humanistic theor : Analyze the most important contributions to humanistic theory by Maslow and Rogers and explain your reasoning

What constitutes the end of a persons life : Death is when life ends. But what constitutes the end of a person's life? Well the bible speaks of several types of death. Two of those are physical death.

Identify any opportunity costs associated with this decision : Which costs are not relevant to this outsourcing decision? Identify any opportunity costs associated with this decision.

Examine the development of self evaluation skills : Examine the development of self evaluation skills with connections to Piaget's theory of Cognitive development

Discuss the act of suicide : The assigned readings this week regarding suicide and euthanasia gave interesting perspectives. I agree that suicide is morally wrong and God does not want.

Discuss the advancements in medical technology : As the lecture discusses, advancements in medical technology, procedures, and practices has created a new meaning of death. With these changes in medicine.

Straddle using at-the-montey european options : Tom invests in a 6-month straddle using at-the-montey European options. The current price of the stock is $100.

User Account

All Pages