Outsourcing decision with qualitative factors
Nadir Corporation, which makes and sells 79,400 radios annually, currently purchases the radio speakers it uses for $12 each. Each radio uses one speaker. The company has idle capacity and is considering the possibility of making the speakers that it needs. Nadir estimates that the cost of materials and labor needed to make speakers would be a total of $10 for each speaker. In addition, the costs of supervisory salaries, rent, and other manufacturing costs would be $168,000. Allocated facility-level costs would be $99,600.
Required
a.Determine the change in net income Nadir would experience if it decides to make the speakers.
b. Discuss the qualitative factors that Nadir should consider.
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