1. Universal Auto Parts manufactures part UAP9used in several of its truck models. 1,000 units are produced each year with production costs as follows: Direct materials $ 80,000 Direct manufacturing labor 50,000 Variable support costs 40,000 Fixed support costs 80,000 Total costs $250,000

The companyhas the option of purchasing part UAP9 from an outside supplier at $24 per unit. IfX12is outsourced, 20% of the fixed costs cannot be immediately converted to other uses.

Required:

a) Describe avoidable costs. What amount of theUAP9production costs is avoidable?

b)If the partis outsourced, 20% of the fixed costs cannot be immediately converted to other uses.Should the company outsourceUAP9?Why or why not? Show your work. c)If the partis outsourced, 20% of the fixed costs cannot be immediately converted to other uses, but the unused space can be rented out for $30,000.Should the company outsourceUAP9?Why or why not? Show your work.

d) What other items should thecompanyconsider before outsourcing any of the parts it currently manufactures?

Answer rating: 100% (QA)

a Avoidable costs are costs that can be eliminated or reduced if a certain activity or decision is made In the case of Universal Auto Parts the avoida... View the full answer