Dong Fang Company fabricates inexpensive automobiles for sale to 3^rd world countries. Each auto includes one wiring harness, which is currently made in-house. Details of the harness fabrication are as follows:
A factory in Indonesia has offered to supply Dong Fang with ready-made units for a price of $14.00 each.
Assume that Dong Fang's fixed costs are unavoidable, but that Dong could use the vacated production facilities to earn an additional $7,500 of profit per month. In order to maximize operational income, Dong Fang should outsource.

Question

Dong Fang Company fabricates inexpensive automobiles for sale to 3^rd world countries. Each auto includes one wiring harness, which is currently made in-house. Details of the harness fabrication are as follows:

Dong Fang Company fabricates inexpensive automobiles for sale to 3<sup>rd</sup> world countries. Each auto includes one wiring harness, which is currently made in-house. Details of the harness fabrication are as follows: A factory in Indonesia has offered to supply Dong Fang with ready-made units for a price of $14.00 each. Assume that Dong Fang's fixed costs are unavoidable, but that Dong could use the vacated production facilities to earn an additional $7,500 of profit per month. In order to maximize operational income, Dong Fang should outsource.

A factory in Indonesia has offered to supply Dong Fang with ready-made units for a price of $14.00 each.
Assume that Dong Fang's fixed costs are unavoidable, but that Dong could use the vacated production facilities to earn an additional $7,500 of profit per month. In order to maximize operational income, Dong Fang should outsource.

Quizplus · Accepted Answer

Outsourcing the wiring harnesses will save Dong Fang money on production costs, allowing for more profit even after factoring in the $7,500 in potential additional profit from using vacated facilities.

Dong Fang Company Fabricates Inexpensive Automobiles for Sale to 3rd

Dong Fang Company Fabricates Inexpensive Automobiles for Sale to 3^rd