Doro Fill Company fabricates automobiles.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 Doro Fill with ready-made units for a cost of $10 each.Assume that Doro Fill's fixed costs are unavoidable and that the company will not be able to use the excess capacity in any profitable manner.In order to maximize operating income,Doro Fill should not outsource.

Question

Doro Fill Company fabricates automobiles.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 Doro Fill with ready-made units for a cost of $10 each.Assume that Doro Fill's fixed costs are unavoidable and that the company will not be able to use the excess capacity in any profitable manner.In order to maximize operating income,Doro Fill should not outsource.

Quizplus · Accepted Answer

11ea86ed_2b03_0286_8b27_e597cb041776_TB3056_00 As the cost of production in-house is less than outsourcing,the company should produce in-house to maximize operating income.

Doro Fill Company Fabricates Automobiles