Moon Appliance manufactures a variety of appliances which all use Part B89.Currently,Moon Appliance manufactures Part B89 in its internal manufacturing process.Moon Appliance produces 9,000 units of Part B89 annually.The annual costs to product Part B89 at the level of 9,000 units include:

All of the fixed manufacturing overhead costs would continue whether Part B89 is made internally or purchased from an outside supplier.Moon Appliance has no alternative use for its manufacturing facilities.Nadal Parts Company has offered to sell 9,000 units of Part B89 to Moon Appliance for $20.00 per unit.What should Moon Appliance do?

Question

Moon Appliance manufactures a variety of appliances which all use Part B89.Currently,Moon Appliance manufactures Part B89 in its internal manufacturing process.Moon Appliance produces 9,000 units of Part B89 annually.The annual costs to product Part B89 at the level of 9,000 units include:

All of the fixed manufacturing overhead costs would continue whether Part B89 is made internally or purchased from an outside supplier.Moon Appliance has no alternative use for its manufacturing facilities.Nadal Parts Company has offered to sell 9,000 units of Part B89 to Moon Appliance for $20.00 per unit.What should Moon Appliance do?

Quizplus · Accepted Answer

B)
Purchase part $20.00
Add fixed cost 3.00
Total cost 23.00
Less build cost 18.00
Savings $5.00

Moon Appliance Manufactures a Variety of Appliances Which All Use