Jeff Company produces a part that is used in the manufacture of one of its products. The
Question:
Jeff Company produces a part that is used in the manufacture of one of its products. The annual costs associated with the production of 11,000 units of this part are as follows:
Direct materials ............$ 25,000
Direct labor ............. 34,000
Indirect production costs variable ..... 65,000
Indirect production costs fixed ...... 40,000
Total costs ..............$164,000
A supplier is willing to sell 11,000 units of the part to Jeff Company for $12.50 per unit. When examining the indirect production costs fixed, Jeff Company determines $10,000 is avoidable.
Required:
If there are no alternative uses for the facilities, should Jeff Company take advantage of the supplier's?
Step by Step Answer:
Managing Supply Chain and Operations An Integrative Approach
ISBN: 978-0132832403
1st edition
Authors: Thomas Foster, Scott E. Sampson, Cynthia Wallin, Scott W Webb