Motor Corp. manufactures machine parts for boat engines. The CEO, James Hamilton, was considering an offer from a subcontractor who would provide 3,000 units of product AB100 for Hamilton for a price of $230,000. If Motor Corp. does not purchase these parts from the subcontractor it must produce them in-house with the following per-unit costs: In addition to the above costs, if Hamilton produces part AB100, he would also have a retooling and design cost of $10,000. Should Motor Corp. accept the offer from the subcontractor?

Question

Motor Corp. manufactures machine parts for boat engines. The CEO, James Hamilton, was considering an offer from a subcontractor who would provide 3,000 units of product AB100 for Hamilton for a price of $230,000. If Motor Corp. does not purchase these parts from the subcontractor it must produce them in-house with the following per-unit costs:  In addition to the above costs, if Hamilton produces part AB100, he would also have a retooling and design cost of $10,000. Should Motor Corp. accept the offer from the subcontractor?

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The Answer of Motor Corp. manufactures machine parts for boat engines. The CEO, James Hamilton, was considering an offer from a subcontractor who would provide 3,000 units of product AB100 for Hamilton for a price of $230,000. If Motor Corp. does not purchase these parts from the subcontractor it must produce them in-house with the following per-unit costs:  In addition to the above costs, if Hamilton produces part AB100, he would also have a retooling and design cost of $10,000. Should Motor Corp. accept the offer from the subcontractor?