Microplex Company must decide whether to insource or outsource some of its components. The total costs of producing 20,000 parts for its computers are as follows: Instead of making the parts at an average cost of $2.50 ($50,000 ÷ 20,000), Microplex has an opportunity to buy the parts at $2.30 per unit. If the company purchases the parts, all the variable costs will be eliminated and three-fourths (75%) of the fixed costs will be eliminated. Should Microplex outsource its components?

Question

Microplex Company must decide whether to insource or outsource some of its components. The total costs of producing 20,000 parts for its computers are as follows:  Instead of making the parts at an average cost of $2.50 ($50,000 ÷ 20,000), Microplex has an opportunity to buy the parts at $2.30 per unit. If the company purchases the parts, all the variable costs will be eliminated and three-fourths (75%) of the fixed costs will be eliminated. Should Microplex outsource its components?

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The Answer of Microplex Company must decide whether to insource or outsource some of its components. The total costs of producing 20,000 parts for its computers are as follows:  Instead of making the parts at an average cost of $2.50 ($50,000 ÷ 20,000), Microplex has an opportunity to buy the parts at $2.30 per unit. If the company purchases the parts, all the variable costs will be eliminated and three-fourths (75%) of the fixed costs will be eliminated. Should Microplex outsource its components?

Microplex Company Must Decide Whether to Insource or Outsource Some