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Llana [10]
2 years ago
10

An outside supplier has offered to make and sell the part to the company for $24.10 each. If this offer is accepted, the supervi

sor's salary and all of the variable costs can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. If management decides to buy part Z95 from the outside supplier rather than to continue making the part, what would be the annual impact on the company's overall net operating income
Business
1 answer:
Soloha48 [4]2 years ago
8 0

Answer:

Net operating income would decrease by $36,000 per year.

Explanation:

The company's current cost of manufacturing a part Z95 is $33.9 which includes all the material, labor and overhead costs. If the company buys this part from an outside supplier it will cost $24.10 each. but the depreciation and factory overhead cannot be avoided. The depreciation is $5.40  and factory overheads are $8.60. This will be added to the cost of buying each part.

$24.10 + $5.40 + $8.60 = $38.1

The cost of buying the part is greater than the cost of making it.

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The strategy of setting the same price with your competitors is called oligopolistic competition. In this case, if one competitor wants to be ahead of other competitors in the market, then such a competitor has to include in their product features that will not be found in the product of their competitors, through this process such a competitor would be ahead of their competitors in the market by having the larger share of the market.

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You are compiling Bertram Boat’s balance sheet. According to your calculations, Bertram has current assets of $85,000 and proper
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