Global Communications, Inc. manufactures communications satellites used in TV signal transmission. The firm currently purchases one component for its satellites from a European firm. A Global Communications engineering team has found a way to use the company’s own component, part number A200, instead of the European component. However, the Global Communications component must be modified at a cost of be modified at a cost of $ 650 per part. The European component costs $ 9,100 per part. Global Communications’ part number A200 costs $ 4,900 before it is modified. Global Communications currently uses 15 of the European components per year.

Calculate the annual differential cost between Global Communications’ two production alternatives.

  • CreatedApril 22, 2014
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