Question

Question 25 5 points de vendor of A manufacturing plant needs to acquire a new type of part for use in assembling its primary end-item product it has the options for acquwing the part can buy the part from an manufacture it in house on one of two different machines can buy the up front cost for equipment purchase, and the per unit varate cost of each option is own below Option Equipment Cost Per unit variable con A Purchase from vendor $180 B: Make on standard machining equipment $125.000 $250,000 C Make on computer controlled machining equipment They forecast demand of 1500 of these parts, and assume the value of any purchased equipment at the end of the project will be negligible (the equipment has no salvage value). Which method should they use? d. There is insufficient information provided to answer this question.

Answer 1

Determine the method to be used by company as follows: A B 1 Option Particulars Amount 2 A. Cost of purchase from vendor $2,70,000 3 B. Cost of making on standard machining equipment $2,45,000 4 C. Cost of making on computer controlled machining equipment $3,02,500 Since method B. that is make on standard machining equipment has the least cost the company should use method B. Therefore, option b. is the correct option. Calculations: B A 1 Option 2 A. B. Particulars Amount Cost of purchase from vendor =1500*180 Cost of making on standard machining equipment =125000+(80*1500) Cost of making on computer controlled machining equipment =250000+(35*1500) C.