Brian Company manufactures a part for its production cycle.The annual costs per unit for 20,000 units of this part are as follows:
Brian Company has been approached by a supplier who will sell 20,000 units of the same part for $940,000.All the fixed indirect production costs are unavoidable if Brian Company ceases production of the part.
Required:
A)Assuming there is no alternative use for the facilities,should Brian Company buy or make the part?
B)Assume the facilities can be rented out for $100,000 per year.Should Brian Company buy the part? If so,how much money will be saved?

Question

Brian Company manufactures a part for its production cycle.The annual costs per unit for 20,000 units of this part are as follows:
  Brian Company has been approached by a supplier who will sell 20,000 units of the same part for $940,000.All the fixed indirect production costs are unavoidable if Brian Company ceases production of the part.
Required: 
A)Assuming there is no alternative use for the facilities,should Brian Company buy or make the part? 
B)Assume the facilities can be rented out for $100,000 per year.Should Brian Company buy the part? If so,how much money will be saved?

Quizplus · Accepted Answer

The Answer of Brian Company manufactures a part for its production cycle.The annual costs per unit for 20,000 units of this part are as follows:
  Brian Company has been approached by a supplier who will sell 20,000 units of the same part for $940,000.All the fixed indirect production costs are unavoidable if Brian Company ceases production of the part.
Required: 
A)Assuming there is no alternative use for the facilities,should Brian Company buy or make the part? 
B)Assume the facilities can be rented out for $100,000 per year.Should Brian Company buy the part? If so,how much money will be saved?

Brian Company Manufactures a Part for Its Production Cycle