Managers at Wager Fabricating Company are reviewing the economic feasibility of manufacturing a part that it currently purchases for a supplier. Forecasted annual demand for the part is 3200 units
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Managers at Wager Fabricating Company are reviewing the economic feasibility of manufacturing a part that it currently purchases for a supplier. Forecasted annual demand for the part is 3200 units. Wagner operates 250 days per year.
Wagner's financial analysts have established a cost of capital of 14% for the use of funds for investments within the company. In addition, over the past year 600,000 has been the average investment in the company's inventory. Accounting information shows that a total of 24,000 was spent on taxes and insurance related to the company's inventory. In addition, an estimated 9000 was lost due to inventory shrinkage, which included damaged goods as well as pilferage. A remaining 15,000 was spent on warehouse overhead, including utility expenses for heating and...