Cost per unit |
Total monthly cost at 1,000,000 units |
|
Variable production cost |
$0.02 |
$20,000 |
Fixed production cost |
$25,000 |
|
Total production cost |
$45,000 |
If production is outsourced, all variable production costs and 70 percent of fixed production costs will be eliminated.
a)
____________________________________________________________
b)
Outsourcing decision will increase cost of the compnay by $2,500. hence make decision will continue apply.
_______________________________________________________________
c)
If space leased for $6,000 per month, compute analysis as follows:
In this situation company saved $3,500. hence accept the decision of outsource.
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