Outsourcing (Make-or-Buy) DecisionAssume a division of Hewlett-Packard currently makes 10,000 circuit boards per year used in producing diagnostic electronic instruments at a cost of $36 per board, consisting of variable costs per unit of $24 and fixed costs per unit of $12. Further assume SanminaCorporation offers to sell Hewlett-Packard the 10,000 circuit boards for $36 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 $30,000 per year. In addition, $5 perunit 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 for outsourcing, if appropriate.

Make or buy decision is a method of choosing the option of either manufacturing or outsourcing the…

Answered: Outsourcing (Make-or-Buy) Decision…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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