A company (The Gulf Company) used to buy components from a Saudi supplier which had its...
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A company (The Gulf Company) used to buy components from a Saudi supplier which had its price fixed throughout the years at $50 per component and has been reliable source. Now The Gulf Company has reduced its production due to lower demand and better work efficiency, thus has the capacity to make its own parts in-house which costs them $40 per component. It requires 300 parts per year and has set $25,000 in yearly investments. [8 Marks] ii. iii. iv. Will it be better to buy the components or make them locally inhouse? If another alternative Bahraini supplier is considered, which would cost them $50 to buy for the first 100 parts, and $45 for every other part ordered. Would it be better to buy from them or stick to the old supplier or make them in-house? If the demand was increased to 2000 parts would your decision change or not? Give some guidelines and set of rules to follow in order to decide on the best action or decision to make in the future. A company (The Gulf Company) used to buy components from a Saudi supplier which had its price fixed throughout the years at $50 per component and has been reliable source. Now The Gulf Company has reduced its production due to lower demand and better work efficiency, thus has the capacity to make its own parts in-house which costs them $40 per component. It requires 300 parts per year and has set $25,000 in yearly investments. [8 Marks] ii. iii. iv. Will it be better to buy the components or make them locally inhouse? If another alternative Bahraini supplier is considered, which would cost them $50 to buy for the first 100 parts, and $45 for every other part ordered. Would it be better to buy from them or stick to the old supplier or make them in-house? If the demand was increased to 2000 parts would your decision change or not? Give some guidelines and set of rules to follow in order to decide on the best action or decision to make in the future.
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To determine whether it is more beneficial for The Gulf Company to buy components or produce them inhouse we need to compare the costs and consider th... View the full answer
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Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young
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