### Calculate the net benefit

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##### Reference no: EM13311354

Assume a division of Hewlett-Packard currently makes 12,000 circuit boards per year used in producing diagnostic electronic instruments at a cost of \$34 per board, consisting of variable costs per unit of \$24 and fixed costs per unit of \$10. Further assume Sanmina-SCI offers to sell Hewlett-Packard the 12,000 circuit boards for \$34 each. If Hewlett-Packard accepts this offer, the facilities currently used to make the boards could be rented to one of Hewlett-Packard's suppliers for \$46,000 per year. In addition, \$6 per unit of the fixed overhead applied to the circuit boards would be totally eliminated.

Calculate the net benefit (cost) to HP of outsourcing the component from Samina-SCI.

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