London, Inc. uses 2,000 units of Part 8G3 each year in the manufacture of one of its products. The company currently produces the part internally, but an outside supplier has offered to provide the part at a price of $15 per part. If London chooses to purchase the part from the outside supplier, one half of it’s the fixed manufacturing overhead will be eliminated. London’s standard unit cost of producing the part is listed below.

Required
Ignoring qualitative factors, should London continue to make the parts internally or purchase them from the outside supplier? Why?

Question

London, Inc. uses 2,000 units of Part 8G3 each year in the manufacture of one of its products. The company currently produces the part internally, but an outside supplier has offered to provide the part at a price of $15 per part. If London chooses to purchase the part from the outside supplier, one half of it’s the fixed manufacturing overhead will be eliminated. London’s standard unit cost of producing the part is listed below.

Required
Ignoring qualitative factors, should London continue to make the parts internally or purchase them from the outside supplier? Why?

Required
Ignoring qualitative factors, should London continue to make the parts internally or purchase them from the outside supplier?  Why?

Quizplus · Accepted Answer

The Answer of London, Inc. uses 2,000 units of Part 8G3 each year in the manufacture of one of its products. The company currently produces the part internally, but an outside supplier has offered to provide the part at a price of $15 per part. If London chooses to purchase the part from the outside supplier, one half of it’s the fixed manufacturing overhead will be eliminated. London’s standard unit cost of producing the part is listed below.

Required
Ignoring qualitative factors, should London continue to make the parts internally or purchase them from the outside supplier?  Why?