Disadvantage of accepting the outside suppliers offer

Assignment Help Financial Management

Reference no: EM131182845

XYZ Ltd manufactures 6,000 units of part c3 each year for use on its production line. At this level of activity, the cost per unit for part c3 is as follows:

Direct materials $3.60

Direct labour 10.00

Variable overhead 2.40

Fixed overhead 12.00

Total cost per part $28.00

An outside supplier has offered to sell 6,000 units of part c3 each year to XYZ Ltd for $24 per part. If Honeywell Ltd accepts this offer, the facilities now being used to manufacture part c3 could be rented to another company at an annual rental of $36,000. However, XYZ Ltd has determined that three-quarters of the fixed overhead being applied to part c3 would continue even if part c3 were purchased from the outside supplier.

a) Prepare an analysis to show the net dollar advantage or disadvantage of accepting the outside supplier's offer.

b) Suggest two other factors that the company might want to consider before making a decision. Explain why.

Reference no: EM131182845

Questions Cloud

Write a paper or create a powerpoint presentation : Write a paper : Select four specific events or developments that span the years covered by this course, based on their impact on the topic.

Mitigation strategies for a construction project : Develop risk mitigation strategies for a construction project to build a small building facility. The following are the risks that have been identified.

Macaulay duration and modified duration : A Treasury bond that settles on October 18, 2013, matures on March 30, 2032. The coupon rate is 5.95 percent and the bond has a 5.36 yield to maturity. What are the Macaulay duration and modified duration?Modified duration and Macaulay duration

Find of conspicuous consumption : Walk around a shopping center or your workplace, looking for and recording as many examples as you can find of conspicuous consumption.

Disadvantage of accepting the outside suppliers offer : XYZ Ltd manufactures 6,000 units of part c3 each year for use on its production line. At this level of activity, the cost per unit for part c3 is as follows: Prepare an analysis to show the net dollar advantage or disadvantage of accepting the outsid..

Exertion of that power legitimate or illegitimate : As you record each example, note the following: Who or what is exercising the power on whom? How is the power being exerted? Is the exertion of that power legitimate or illegitimate?

Developing a better healthcare delivery system : write a 1 page summary, and you will create a table highlighting the findings, which will be sent to the COO on how accountability strategies support clinical and patients' outcomes, how the measures chosen will benefit the staff and patients in d..

Define finance and what role finance has in your life : Define finance in your own words, what role finance has in your life, and what you hope to learn in this class. Summarize the key points in the article you found. Be sure to provide a link to the article or articles you are referencing.

Hat is the yield to call for this bond : Fooling Company has a 13.8 percent callable bond outstanding on the market with 25 years to maturity, call protection for the next 10 years, and a call premium of $25. What is the yield to call (YTC) for this bond if the current price is 110 percent ..

User Account

All Pages