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Should ACE continue to manufacture Product A or purchase Pro

ACE Corporations incurs a $9 per unit cost for Product A, which it currently manufactures and sells for $13.50 per unit. Instead of manufacturing and selling this product, ACE can purchase Product B for $5 per unit and sell it for $12 per unit. If it does so, unit sales would remain unchanged and $5 of the $9 per unit costs assigned to Product A would be eliminated. Should the company continue to manufacture Product A or purchase Product B for resale?

Explain each calculation and defend the choice made.

Solution Preview

ACE Corporations incurs a $9 per unit cost for Product A, which it currently manufactures and sells for $13.50 per unit. Instead of manufacturing and selling this product, ACE can purchase Product B for $5 per unit and sell it for $12 per unit. If it does so, unit sales would remain unchanged and $5 of the $9 per unit costs assigned ...

Solution Summary

This solution is comprised of a detailed explanation to answer should the company continue to manufacture Product A or purchase Product B for resale.

$2.19