Use the Tuna Colada scenario to answer this question.What is the minimum value the cost of subcontracting must have to ensure that it is not used during the planning period?

A) $110 per unit
B) $107 per unit
C) $104 per unit
D) $101 per unit

Question

Jeomary Montoya · Accepted Answer

Final Answer : B, Explanation :  To determine if subcontracting is used during the planning period, we need to compare the marginal cost of subcontracting to the marginal cost of holding inventory. The marginal cost of holding inventory is the inventory holding cost plus the marginal cost of stockout, which is $16 per unit per month. If the marginal cost of subcontracting is greater than or equal to $107, then it is more cost-effective to produce in-house rather than subcontract. If it is less than $107, then subcontracting should be used. Therefore, the minimum value of the cost of subcontracting that ensures it is not used during the planning period is $107 per unit. The closest answer choice to this is B, $107 per unit.

Use the Tuna Colada scenario to answer this question.What is the minimum value the cost of subcontracting must have to ensure that it is not used during the planning period?

A) $110 per unit
B) $107 per unit
C) $104 per unit
D) $101 per unit

Definitions

Learning Objectives

Learning Objectives

Related questions

Use the Tuna Colada scenario to answer this question.What is the minimum value the cost of subcontracting must have to ensure that it is not used during the planning period?A) $110 per unitB) $107 per unitC) $104 per unitD) $101 per unit

Definitions

Learning Objectives

Learning Objectives

Related questions

Use the Tuna Colada scenario to answer this question.What is the minimum value the cost of subcontracting must have to ensure that it is not used during the planning period?

A) $110 per unit
B) $107 per unit
C) $104 per unit
D) $101 per unit