H.J. Manufacturing produces 10,000 units of a part that is used in their assembly process. The production costs are as follows:

H.J. Manufacturing has the option of purchasing these units from an outside supplier at $10.75 per unit. If the part is outsourced, 40% of the fixed costs cannot be immediately converted to other uses.
a.Describe avoidable costs. What amount of the part's production costs is avoidable?
b.Should H.J. outsource the part? Why or why not?
c.What other items should H.J. consider before outsourcing any of the parts it currently manufactures?

Question

H.J. Manufacturing produces 10,000 units of a part that is used in their assembly process. The production costs are as follows:
  
H.J. Manufacturing has the option of purchasing these units from an outside supplier at $10.75 per unit. If the part is outsourced, 40% of the fixed costs cannot be immediately converted to other uses.
a.Describe avoidable costs. What amount of the part's production costs is avoidable?
b.Should H.J. outsource the part? Why or why not?
c.What other items should H.J. consider before outsourcing any of the parts it currently manufactures?

Quizplus · Accepted Answer

The Answer of H.J. Manufacturing produces 10,000 units of a part that is used in their assembly process. The production costs are as follows:
  
H.J. Manufacturing has the option of purchasing these units from an outside supplier at $10.75 per unit. If the part is outsourced, 40% of the fixed costs cannot be immediately converted to other uses.
a.Describe avoidable costs. What amount of the part's production costs is avoidable?
b.Should H.J. outsource the part? Why or why not?
c.What other items should H.J. consider before outsourcing any of the parts it currently manufactures?

HJ Manufacturing Produces 10,000 Units of a Part That Is