For many years, Condor Company has produced a small part that it uses in the production of its standard line of equipment. The company's cost of producing one part, based on a production level of 50 000 parts per year, is:
An outside supplier has offered to supply the part to Condor for $29 per part. Condor has determined that 40% of the fixed overhead represents salaries and other costs which can be eliminated if the parts are purchased.
Required:
Prepare an analysis to determine whether Condor should accept the supplier's offer.

Question

For many years, Condor Company has produced a small part that it uses in the production of its standard line of equipment. The company's cost of producing one part, based on a production level of 50 000 parts per year, is:
  An outside supplier has offered to supply the part to Condor for $29 per part. Condor has determined that 40% of the fixed overhead represents salaries and other costs which can be eliminated if the parts are purchased.
Required:
Prepare an analysis to determine whether Condor should accept the supplier's offer.

Quizplus · Accepted Answer

The Answer of For many years, Condor Company has produced a small part that it uses in the production of its standard line of equipment. The company's cost of producing one part, based on a production level of 50 000 parts per year, is:
  An outside supplier has offered to supply the part to Condor for $29 per part. Condor has determined that 40% of the fixed overhead represents salaries and other costs which can be eliminated if the parts are purchased.
Required:
Prepare an analysis to determine whether Condor should accept the supplier's offer.

For Many Years, Condor Company Has Produced a Small Part