Harris Company currently produces a component that it uses in making some of its products. Harris has calculated the following costs for making the part:
Harris is considering outsourcing the component. A supplier has offered to sell the component to Harris for $52 each. Harris needs 8,000 units each year. Required: Should Harris outsource the component? Support your answer with appropriate computations.
What will be an ideal response?
Based on this computation, the company is $2 per unit (or $16,000 total) better off to make the component. Harris should not outsource the component.
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