Louder Company has the option of purchasing part MNO from an outside supplier at

Question

Louder Company has the option of purchasing part MNO from an outside supplier at $11.20 per unit.  If MNO is outsourced, 40% of the fixed costs cannot be immediately converted to other uses.

Question 1:  What amount of the MNO production costs is avoidable? (five points)

Question 2:  Should the company outsource MNO?  Why or why not?  (five points)

Question 3: What other items should the company consider before outsourcing any of the parts it manufactures?  (five points)  

Louder Company has the option of purchasing part MNO from an outside supplier at $11.20 per unit.  If MNO is outsourced, 40% of the fixed costs cannot be immediately converted to other uses.

Question 1:  What amount of the MNO production costs is avoidable? (five points)

Question 2:  Should the company outsource MNO?  Why or why not?  (five points)

Question 3: What other items should the company consider before outsourcing any of the parts it manufactures?  (five points)  

Explanation / Answer

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