What will it cost the firm to acquire a transmission

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An auto company can buy transmissions for $400 from one of several suppliers or it can make the equivalent transmission for $420. However, to assure it sells a quality product it has to do incoming inspection on every transmission and the firm’s cost accountants calculate the inspection costs $30 per transmission. a. Does the company make or buy? b. If digital technology reduces the cost of testing to $5 per transmission will the firm’s behavior change? What will it cost the firm to acquire a transmission? c. Change one assumption: Suppose the firm has only one supplier. What will it cost the firm to acquire a transmission? This requires some explanation.

Reference no: EM13995802

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