1. Climate-Control, Inc., manufactures a vanety of heating and air-conditioning

Question

1.

Climate-Control, Inc., manufactures a vanety of heating and air-conditioning units. The company is currently manufacturing all of its own component parts. An outside supplier has offered to sell a thermostat to Climate-Control for S20 per unit. To evaluate this offer, Climate-Control, Inc., has gathered the following information relating to its own cost of producing the thermostat internally: Required:. Assuming that the company has no alternative use for the facilities now being used to produce the thermostat, compute the total cost of making and buying the parts. (Omit the "$" sign in your response.) 1b. Should the outside supplier's offer be accepted? Accept Reject Suppose that if the thermostats were purchased, Climate-Control, Inc., could use the freed capacity to launch a new product. The segment margin of the new product would be $65,000 per year. Compute the total cost of making and buying the parts. (Omit the "$" sign in your response.) Make Buy Total relevant cost Should Climate-Control, Inc., accept the offer to buy the thermostats from the outside supplier for $20 each? Accept Reject

Explanation / Answer

1.a)

15 2,25000

1.b)

reject

2.a)

2.b)

accept

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