One of your Taiwanese suppliers has bid on a new line of molded plastic parts...
70.2K
Verified Solution
Link Copied!
Question
Accounting
One of your Taiwanese suppliers has bid on a new line of molded plastic parts that is currently being assembled at your plant. The supplier has bid $0.10 per part, given a forecasted demand of 220,000 parts in year 1; 330,000 in year 2; and 490,000 in year 3. Shipping and handling of parts from the suppliers factory is estimated at $0.02 per unit. Additional inventory handling charges should amount to $0.004 per unit. Finally, administrative costs are estimated at $15 per month. Although your plant is able to continue producing the part, the plant would need to invest in another molding machine, which would cost $13,000. Direct materials can be purchased for $0.06 per unit. Direct labor is estimated at $0.03 per unit plus a 50 percent surcharge for benefits; indirect labor is estimated at $0.014 per unit plus 50 percent benefits. Up-front engineering and design costs will amount to $34,000. Finally, management has insisted that overhead be allocated if the parts are made in-house at a rate of 100 percent of direct labor cost. The firm uses a cost of capital of 13 percent per year. (a) Calculate the NPV. (Round your answer to the nearest dollar amount. Negative amount should be indicated by a minus sign.Omit the "$" sign in your response.) NPV $
The last time i posted this question, the answer was incorrect.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!