Wykle Company purchases 10,000 units of a part that it needs for production of its product. Notification has just been received from the supplier that a price increase will take effect shortly which will bring the price of each part to $30. Wykle is considering using some idle facilities to produce the part. The production costs to produce the needed 10,000 parts are as follows: The idle facilities could also be rented out at an annual rent of $36,000. All the factory overhead costs are avoidable.
Required: Determine if Wykle should continue to buy the part or produce it in house.

Question

Wykle Company purchases 10,000 units of a part that it needs for production of its product. Notification has just been received from the supplier that a price increase will take effect shortly which will bring the price of each part to $30. Wykle is considering using some idle facilities to produce the part. The production costs to produce the needed 10,000 parts are as follows:  The idle facilities could also be rented out at an annual rent of $36,000. All the factory overhead costs are avoidable.
Required: Determine if Wykle should continue to buy the part or produce it in house.

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The Answer of Wykle Company purchases 10,000 units of a part that it needs for production of its product. Notification has just been received from the supplier that a price increase will take effect shortly which will bring the price of each part to $30. Wykle is considering using some idle facilities to produce the part. The production costs to produce the needed 10,000 parts are as follows:  The idle facilities could also be rented out at an annual rent of $36,000. All the factory overhead costs are avoidable.
Required: Determine if Wykle should continue to buy the part or produce it in house.

Wykle Company Purchases 10,000 Units of a Part That It