QUESTION64.

SIEGEAUTO produces seats for the automotive industry. It produces 10,000 units

of the Seat (A) which has a variable unit cost of €150. The fixed production

costs made up of the management of the plant are €200,000. The purchasing

department assumes that, as this product is not strategic, the manufacture of

the seat (A) may be outsourced to a subcontractor who offered to sell it to

SIEGEAUTO at €160 per unit.

In this case, it could reuse the freed-up capacity and produce another

piece of equipment that should generate €150,000 in profit. 

Should

SIEGEAUTO stop producing Seat (A) in-house?