The Copper Company manufactures 5,000 rolls of cable each period. The cable is used as an input for producing several other products that Copper manufactures. The full manufacturing costs for a batch of 50 rolls of cable are:
The fixed manufacturing overhead is comprised of depreciation expenses related to prior investments in facilities and equipment that are used in the manufacturing of the cable. These assets have no other use than for the manufacturing of the cable. An outside supplier has offered to sell Copper the 5,000 rolls of cable necessary to meet production needs this period for a lump-sum of $225,000.
If Copper accepts this outside supplier's offer, how much better or worse off will the company be?

Question

The Copper Company manufactures 5,000 rolls of cable each period. The cable is used as an input for producing several other products that Copper manufactures. The full manufacturing costs for a batch of 50 rolls of cable are:
  The fixed manufacturing overhead is comprised of depreciation expenses related to prior investments in facilities and equipment that are used in the manufacturing of the cable. These assets have no other use than for the manufacturing of the cable. An outside supplier has offered to sell Copper the 5,000 rolls of cable necessary to meet production needs this period for a lump-sum of $225,000.
If Copper accepts this outside supplier's offer, how much better or worse off will the company be?

Quizplus · Accepted Answer

The Answer of The Copper Company manufactures 5,000 rolls of cable each period. The cable is used as an input for producing several other products that Copper manufactures. The full manufacturing costs for a batch of 50 rolls of cable are:
  The fixed manufacturing overhead is comprised of depreciation expenses related to prior investments in facilities and equipment that are used in the manufacturing of the cable. These assets have no other use than for the manufacturing of the cable. An outside supplier has offered to sell Copper the 5,000 rolls of cable necessary to meet production needs this period for a lump-sum of $225,000.
If Copper accepts this outside supplier's offer, how much better or worse off will the company be?

The Copper Company Manufactures 5,000 Rolls of Cable Each Period