The Efficient Printing Press Company has been purchasing all of its small machined shafts and gears from a machine shop for about $130,000 annually.If Efficient buys two lathes,a drill press,and a milling machine,it could produce these parts itself.The equipment,materials,and two machinists would cost the company $450,000 over five years,a savings of $200,000.Should Efficient pursue this option?
A) Yes,but only if this is the best use of the company's resources and the money cannot be used to increase profit even more with another project.
B) Yes,because it is cheaper to make rather than to buy.
C) No,because the savings are not large enough to justify the change.
D) No,because it is cheaper to buy these parts than make them.
Correct Answer:
Verified
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