Enthusiastic Products is deciding whether to outsource production of a certain component that is included in all of its products. It currently costs Enthusiastic Products $1.20 to make each component in-house. If Enthusiastic Products outsources, it can buy the component ready-made for $0.90 each, and can shut down the production facilities it is currently using to manufacture the component, and save $20,000 a year in fixed costs. Annual requirement for the component is 12,000 units. What is the effect of outsourcing?

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The Answer of Enthusiastic Products is deciding whether to outsource production of a certain component that is included in all of its products. It currently costs Enthusiastic Products $1.20 to make each component in-house. If Enthusiastic Products outsources, it can buy the component ready-made for $0.90 each, and can shut down the production facilities it is currently using to manufacture the component, and save $20,000 a year in fixed costs. Annual requirement for the component is 12,000 units. What is the effect of outsourcing?

Enthusiastic Products Is Deciding Whether to Outsource Production of a Certain