A company is planning to introduce a new portable computer to its existing product line.Management must decide whether to make the computer case or buy it from an outside supplier.The lowest outside price is $90.If the case is produced internally,the company will have to purchase new equipment that will yield annual depreciation of $130,000.The company will also need to rent a new production facility at $200,000 a year.At 20,000 cases per year,a preliminary analysis of production costs shows the following:
Required:
(1)Determine whether the company should make the cases or buy them from the outside supplier.
(2)What other factors,besides cost,should the company consider?

Question

A company is planning to introduce a new portable computer to its existing product line.Management must decide whether to make the computer case or buy it from an outside supplier.The lowest outside price is $90.If the case is produced internally,the company will have to purchase new equipment that will yield annual depreciation of $130,000.The company will also need to rent a new production facility at $200,000 a year.At 20,000 cases per year,a preliminary analysis of production costs shows the following:

Required:
(1)Determine whether the company should make the cases or buy them from the outside supplier.
(2)What other factors,besides cost,should the company consider?

Mi kael Gabriel · Accepted Answer

Final Answer :

(1)Incremental cost to make the cases:

(2)The company also should consider such things as quality control,customer reactions,suppliers' dependability,and the availability and training of employees.

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