Should sunshine accept the special order

Reference no: EM131816797

Question: Make or Buy Sunshine, Corp., estimates it will produce 20,000 units of a part that goes into its final product. It currently produces this part internally, but is considering outsourcing this activity. Current internal capacity permits for a maximum of 40,000 units of the part. The production manager has prepared the following information concerning the internal manufacture of 40,000 units of the part:

The fixed overhead of $5 per unit includes a $1.70 per unit allocation for salary paid to a supervisor to oversee production of the part. The fixed costs would not be reduced by outsourcing, except the supervisor would be terminated. Assume that if Sunshine outsources, its purchase price from the supplier is $18 per unit.

1. Should Sunshine outsource?

2. Assume Sunshine has received a special order for 12,000 units of the part from Express, Co. Express will pay Sunshine $28 per part, but will take the parts only if they have been manufactured by Sunshine. Thus, Express will engage in the special order only if Sunshine does not outsource any of its production. Should Sunshine accept the special order?

Reference no: EM131816797

Questions Cloud

Describe the potential barriers of e-learning readiness : Describe the potential barriers of e-learning readiness. Analyze how e-learning readiness has affected your success at Ashford University.

African aids patients more diligent in taking medicine : "African AIDS Patients More Diligent in Taking Medicine Than in U.S." was reported in 2003. On average, "American patients tell their doctors

Explanation for the positive correlation : The relationship between students' weights and earnings was explored. Because gender would play a role in both variables' values, regression

Explain the impact of failure to comply with state laws : Explain the impact of failure to comply with state laws, and statutes in health care. Be sure to include doctrine of corporate negligence in your answer.

Should sunshine accept the special order : Assume Sunshine has received a special order for 12,000 units of the part from Express, Co. Express will pay Sunshine $28 per part.

Suppose a large sample of college students : Suppose a large sample of college students shows that students who have pierced ears tend to earn less money.

Complete below table to calculate each years current ratio : Complete the below table to calculate income statement data in common-size percents

Describe how you could use reporting systems to assess : Funds are given to activities that few students find attractive, & insufficient funds are allocated to new activities in which students do want to participate.

Environmentalists concerned about global warming : Environmentalists concerned about global warming can take a variety of approaches to produce evidence that temperatures are on the rise.

User Account

All Pages