Safaricom makes two products: E-SIM and regular cell phone sim cards for Telecom providers. The regular...
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Safaricom makes two products: E-SIM and regular cell phone sim cards for Telecom providers. The regular sim cards sell for $8.6 each. Safaricom sells 1008615 regular sim cards each year to Telecom providers. Safaricom's annual fixed costs for the regular sim card division is $605000 per year. The variable cost per sim card is $3.6. The total investment attributable to regular sim cards is $5520000. Safaricom has a minimum acceptable rate of return (required rate of return) on investment of 10%. Safaricom has been thinking of outsourcing the regular sim card production so that it can focus on the E-SIM division. Kinnetic Inc. has approached Safaricom to produce the regular sim cards for Safaricom for $2.0 each. Safaricom would completely eliminate the variable production cost for the regular sim cards but still have to pay the variable selling and admin cost per regular sim card. Overall, from the variable cost per sim card of $3.6, they would be able to save $1.8 per sim card. If Safaricom outsources the production of regular sim cards, they can eliminate 48% of the fixed costs and assets attributable to regular sim cards. What is the change in Safaricom's residual income of outsourcing the production of the regular sim cards? If the change is a reduction in residual income, enter your answer with a negative sign without leaving any spaces. Round your final answer to the nearest whole number (integer). Round interim calculations to 3 decimal points. Do not include any dollar signs, percentage % signs, commas, decimal places and/or spaces in your answer. Your answer should only include numbers. For example, if the correct answer is 1021, you should enter 1021 as your answer. If you enter $1021 or 1,021 or 1 021 or $1021.00, your answer will be marked wrong. For negative numbers; use a negative sign before the number e.g. -1021. Do not use brackets for negative numbers and do not leave a space between the negative sign and the number. Safaricom makes two products: E-SIM and regular cell phone sim cards for Telecom providers. The regular sim cards sell for $8.6 each. Safaricom sells 1008615 regular sim cards each year to Telecom providers. Safaricom's annual fixed costs for the regular sim card division is $605000 per year. The variable cost per sim card is $3.6. The total investment attributable to regular sim cards is $5520000. Safaricom has a minimum acceptable rate of return (required rate of return) on investment of 10%. Safaricom has been thinking of outsourcing the regular sim card production so that it can focus on the E-SIM division. Kinnetic Inc. has approached Safaricom to produce the regular sim cards for Safaricom for $2.0 each. Safaricom would completely eliminate the variable production cost for the regular sim cards but still have to pay the variable selling and admin cost per regular sim card. Overall, from the variable cost per sim card of $3.6, they would be able to save $1.8 per sim card. If Safaricom outsources the production of regular sim cards, they can eliminate 48% of the fixed costs and assets attributable to regular sim cards. What is the change in Safaricom's residual income of outsourcing the production of the regular sim cards? If the change is a reduction in residual income, enter your answer with a negative sign without leaving any spaces. Round your final answer to the nearest whole number (integer). Round interim calculations to 3 decimal points. Do not include any dollar signs, percentage % signs, commas, decimal places and/or spaces in your answer. Your answer should only include numbers. For example, if the correct answer is 1021, you should enter 1021 as your answer. If you enter $1021 or 1,021 or 1 021 or $1021.00, your answer will be marked wrong. For negative numbers; use a negative sign before the number e.g. -1021. Do not use brackets for negative numbers and do not leave a space between the negative sign and the number.
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