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ABC Company, a producer of snow boards, is evaluating a new process for applying the ?nish to its snow boards. DEF Company has offered to apply the ?nish for $170,000 in ?xed costs and a unit variable cost of $0.65. ABC Company currently incurs a ?xed annual cost of $125,000 and has a variable cost of $0.90 per unit. Annual demand for the snow boards is 160,000. (a) Calculate the annual cost of the current process used at Downhill Boards. (b) Calculate the annual cost if Durable Finish Company applies the ?nish. (c) Find the indifference point for these two alternatives. (d) How much of a change in demand is needed to justify outsourcing the process?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M91903749

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