Why should eastside buy the component

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Reference no: EM131908943

Problem

Make or Buy Eastside company incurs a total cost of $120,000 in producing 10,000 units of a component needed in the assembly of its major product. The component can be purchased from an outside supplier $11 per unit. A related cost study indicates that the total cost of the component fixed costs equal to 50% of the variable costs involved.

a. Should Eastside buy the component if it cannot otherwise use the released capacity? Present your answer in the form of differential analysis.

b. What would be your answer to requirement (a) if the released capacity could be used in a project that would generate $50,000 of contribution margin?

Reference no: EM131908943

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