4.Analyzing a Make or Buy Decision Flyaway Company also has the Cyclone fan mode

Question

4.Analyzing a Make or Buy Decision Flyaway Company also has the Cyclone fan model. It is the company's top-selling model, with sales of 30,000 units per year. This model has a dual fan as well as a thermostat component that causes the fan to cycle on and off depending on the room temperature. Flyaway has always manufactured the thermostat component but is considering buying the part from a supplier. It costs Flyaway S5 to make cach thermostat (S3 variable and S2 fixed). Mastat Co. has offered to sell tho component to Flyaway for S4. wawy ,decision to purchase the part from Mos at will eliminate all variable costs but none of the fixed costs. Flyaway has no other possible uses for the area currently dedicated to the Determine whether Flyaway should continue to make the thermostat or purchase the part from Mostat Co. Justify your answer The following information pertains to Number 5-7 Electronic Playground, Inc. (EPI) manufactures and sclls computer games for children. The company has several product lines based on the age range ofthe trget market and whether the games are marketod as educational or entertainment. EPI sells both individual steering wheels, electronic tablets, and hand controls. To date, EPI has developed and manufactured all CDs itself as well as the accessories and packaging for all of its products. as well as packaged sets. All games are in CD format, and some utilize accessories such as The gaming market has traditionally been targeted at teenagers and young adults. However, the incrcasing affordability of computers and the incorporation of computer activities into junior high and clementary school curriculums has led to a significant increase in sales to younger children EPI has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The company currently has excess capacity and is investigating several possible ways to improve profitability

Explanation / Answer

The cost of making a thermostat by Flyaway is $5 , which includes $2 fixed cost which cannot be avoided.

Hence the saving which flyaway can achieve by Flyaway is $3 , which is less than the cost of buying ,$4, from the suplier Flyaway will lose $1 per unit of thermostat if they buy.

Therefore Flyaway should make the termostat themselves.

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.