Orbital Communications, Inc. manufactures communications satellites used in TV signal transmission. The firm currently purchases one component for its satellites from a European firm. An Orbital Communications engineering team has found a way to use the company’s own component, part numberA200, instead of the European component. However, the Orbital Communications component must be modified at a cost of $500 per part. The European component costs $8,900 per part. Orbital Communications’part number A200 costs $5,100 before it is modified. Orbital Communications currently uses 10 of the European components per year.Required: Calculate the annual differential cost between Orbital Communications’ two production alternatives.

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Chapter1: Financial Statements And Business Decisions
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Orbital Communications, Inc. manufactures communications satellites used in TV signal transmission. The firm currently purchases one component for its satellites from a European firm. An Orbital Communications engineering team has found a way to use the company’s own component, part number
A200, instead of the European component. However, the Orbital Communications component must be modified at a cost of $500 per part. The European component costs $8,900 per part. Orbital Communications’
part number A200 costs $5,100 before it is modified. Orbital Communications currently uses 10 of the European components per year.
Required: Calculate the annual differential cost between Orbital Communications’ two production alternatives.

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