Bell Company makes fax machines. Currently Bell makes all components of the fax machine in house. An outside company has offered to supply one component, part number B48 for $8 each. Bells uses 15,000 of these components per years. Costs of B48 are as follows.
Assume that fixed overhead is allocated and cannot be avoided. Should Bell purchase the part from the outside supplier and how much will income increase or decrease.
What are some of the potential problems which might be encountered in changing from a budget to a cost estimation movie making system?