Doro Fill Company fabricates inexpensive automobiles for sale to third 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 Dora Fill with ready-made units for a price of $10 each.Assume that Doro Fill's fixed costs are unavoidable,but the company could use the vacated production facilities to earn an additional $5,000 of profit per month.In order to maximize operating income,Doro Fill should outsource.

Question

Doro Fill Company fabricates inexpensive automobiles for sale to third 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 Dora Fill with ready-made units for a price of $10 each.Assume that Doro Fill's fixed costs are unavoidable,but the company could use the vacated production facilities to earn an additional $5,000 of profit per month.In order to maximize operating income,Doro Fill should outsource.

Quizplus · Accepted Answer

11ea84d1_118f_59ce_83dc_4706583b7edb_TB3006_00 As the relevant cost in outsourcing is less than in-house,the company should outsource to maximize operating income.

Doro Fill Company Fabricates Inexpensive Automobiles for Sale to Third