Solution-What are the potential dangers of outsourcing

What are the potential dangers of outsourcing

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Question - Toronto Auto Co [TACo], has a parts division that needs 1,000 units of component CX12 per period in making car parts. It can buy the component for $1,255 each or make them under the following circumstances:

Per Unit Direct materials $ 500

Direct manufacturing labour 250

Variable manufacturing overhead 200

Fixed manufacturing overhead 350

Total $1,300

If TACo buys the components, it can save 25% of fixed manufacturing overhead.

-Show calculations to prove whether TACo should make or buy the component. Alternatively, if TACo were to manufacture the part in-house, it can use extra capacity to supply another company that uses the same component.

-What cost information should be used for pricing the extra units?

-List additional non-financial factors the company should use in deciding whether to make or buy the component.

-What are the potential dangers of outsourcing in this situation?

Reference no: EM132883682

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What are the potential dangers of outsourcing

Reference no: EM132883682

Reference no: EM132883682

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