Deer currently manufactures a subcomponent that is used in its main product. A supplier has offered to supply all the subcomponents needed at a price of $12. Deer currently produces 80,000 subcomponents at the following manufacturing costs: a. If Deer has no alternative uses for the manufacturing capacity, what would be the profit impact of buying the subcomponents from the supplier?
b. If Deer has no alternative uses for the manufacturing capacity, what would be the maximum price per unit they would be willing to pay the supplier?
c. Now assume Deer would avoid $120,000 in equipment leases and salaries if the subcomponent were purchased from the supplier. Now what would be the profit impact of buying from the supplier?

Question

Deer currently manufactures a subcomponent that is used in its main product. A supplier has offered to supply all the subcomponents needed at a price of $12. Deer currently produces 80,000 subcomponents at the following manufacturing costs:  a. If Deer has no alternative uses for the manufacturing capacity, what would be the profit impact of buying the subcomponents from the supplier?
b. If Deer has no alternative uses for the manufacturing capacity, what would be the maximum price per unit they would be willing to pay the supplier?
c. Now assume Deer would avoid $120,000 in equipment leases and salaries if the subcomponent were purchased from the supplier. Now what would be the profit impact of buying from the supplier?

Quizplus · Accepted Answer

The Answer of Deer currently manufactures a subcomponent that is used in its main product. A supplier has offered to supply all the subcomponents needed at a price of $12. Deer currently produces 80,000 subcomponents at the following manufacturing costs:  a. If Deer has no alternative uses for the manufacturing capacity, what would be the profit impact of buying the subcomponents from the supplier?
b. If Deer has no alternative uses for the manufacturing capacity, what would be the maximum price per unit they would be willing to pay the supplier?
c. Now assume Deer would avoid $120,000 in equipment leases and salaries if the subcomponent were purchased from the supplier. Now what would be the profit impact of buying from the supplier?

Deer Currently Manufactures a Subcomponent That Is Used in Its