Tapeo Company has always made its electronic components that go into their GPS systems in-house....
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Tapeo Company has always made its electronic components that go into their GPS systems in-house. Streeter Company has offered to supply these electronic components at a price of $38 each. Tapeo uses 18,000 units of these components each year. The cost per unit of this component is as follows: Direct material $13.75 Direct labor 16.00 Variable overhead 7.00 Fixed overhead 8.25 Total $45.00 Assume that 45% of Tapeo Company's fixed overhead would be eliminated if the electronic component was no longer produced in-house. Required: Show your calculations! A. If Tapeo decided to purchase the electronic component from Streeter Company how much would its operating income increase or decrease? B. Should Tapeo continue to make the electronic component or buy it from Streeter Company?
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