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Required Should HP outsource this component from Sanmina Corporation? Support your answer with relevant cost calculations.

Required Should HP outsource this component from Sanmina Corporation? Support your answer with relevant cost calculations.

FINANCIAL ACCOUNTING
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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QC 28.

E17-21. Outsourcing (Make-or-Buy) Decision Assume a division of HP Inc. currently makes 50,000 circuit boards per year used in producing diagnostic electronic instruments at a cost of $50 per board, consisting of variable costs per unit of $35 and fixed costs per unit of $15. Further assume Sanmina Corporation offers to sell HP the 50,000 circuit boards for $50 each. If HP accepts this offer, the facilities currently used to make the boards could be rented to one of HP's suppliers for $75,000 per year. In addition, $8 per unit of the fixed overhead applied to the circuit boards would be totally eliminated. Required Should HP outsource this component from Sanmina Corporation? Support your answer with relevant cost calculations.
Transcribed Image Text:E17-21. Outsourcing (Make-or-Buy) Decision Assume a division of HP Inc. currently makes 50,000 circuit boards per year used in producing diagnostic electronic instruments at a cost of $50 per board, consisting of variable costs per unit of $35 and fixed costs per unit of $15. Further assume Sanmina Corporation offers to sell HP the 50,000 circuit boards for $50 each. If HP accepts this offer, the facilities currently used to make the boards could be rented to one of HP's suppliers for $75,000 per year. In addition, $8 per unit of the fixed overhead applied to the circuit boards would be totally eliminated. Required Should HP outsource this component from Sanmina Corporation? Support your answer with relevant cost calculations.
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