QUESTION 2 Not yet answered Points out of 1.00 P Flag question Outsourcing (Make
ID: 2562507 • Letter: Q
Question
QUESTION 2 Not yet answered Points out of 1.00 P Flag question Outsourcing (Make-or-Buy) Decision Assume a division of Hewlett-Packard currently makes 12,000 circuit boards per year used in producing diagnostic electronic instruments at a cost of $34 per board, consisting of variable costs per unit of $24 and fixed costs per unit of $10. Further assume Sanmina Corporation offers to sell Hewlett-Packard the 12,000 circuit boards for $34 each. If Hewlett-Packard accepts this offer, the facilities currently used to make the boards could be rented to one of Hewlett-Packard's suppliers for $46,000 per year. In addition, $6 per unit of the fixed overhead applied to the circuit boards would be totally eliminated. Should HP outsource this component from Sanmina Corporation? Calculate the net advantage (disadvantage) to HP of outsourcing the component from Samina Corporation. Use a negative sign with your answer to indicate a net disadvantage, if appropriate.Explanation / Answer
As multiple questions have been asked, only 1 can be answered at a time. 2 Make Buy Per unit 12000 units Per unit 12000 units Variable costs 24 288000 Fixed costs 4 48000 Purchase cost 34 408000 Opportunity cost 46000 Total 382000 408000 Net advantage(disadvantage) of outsourcing = 382000-408000 = -26000