X Company currently buys 11,000 units of a component part each year from a supplier for $7.50
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X Company currently buys 11,000 units of a component part each year from a supplier for $7.50 each but is considering making them instead. Variable costs of making would be $4.50 per unit; additional annual fixed costs would be $6,500. Equipment would have to be purchased for $30,000 and will last for 7 years, at which time it will have a disposal value of $6,000. Assuming a discount rate of 4%, what is the net present value of making the part instead of continuing to buy it?
Related Book For
Managerial accounting
ISBN: 978-0471467854
1st edition
Authors: ramji balakrishnan, k. s i varamakrishnan, Geoffrey b. sprin
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