Orbital Communications, Inc. manufactures communications satellites used in TV signal transmission. The firm currently purchases one component for its satellites from a European firm. An Orbital Communications engineering team has found a way to use the company’s own component, part numberA200, instead of the European component. However, the Orbital Communications component must be modified at a cost of $500 per part. The European component costs $8,900 per part. Orbital Communications’part number A200 costs $5,100 before it is modified. Orbital Communications currently uses 10 of the European components per year.Required: Calculate the annual differential cost between Orbital Communications’ two production alternatives.
Orbital Communications, Inc. manufactures communications satellites used in TV signal transmission. The firm currently purchases one component for its satellites from a European firm. An Orbital Communications engineering team has found a way to use the company’s own component, part number
A200, instead of the European component. However, the Orbital Communications component must be modified at a cost of $500 per part. The European component costs $8,900 per part. Orbital Communications’
part number A200 costs $5,100 before it is modified. Orbital Communications currently uses 10 of the European components per year.
Required: Calculate the annual differential cost between Orbital Communications’ two production alternatives.
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