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Blowing Sand Company also has the Blast fan model. It is the company's top-selling model...

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Accounting

Blowing Sand Company also has the Blast fan model. It is the company's top-selling model with sales of 30,000 units per year. This model has a dual fan as well as a thermostat component that causes the fan to cycle on and off depending on the room temperature. Blowing Sand has always manufactured the thermostat component but is considering buying the part from a supplier.
It costs Blowing Sand $5 to make each thermostat ( $2.50 variable and $2.50 fixed). Flurry Company has offered to sell the component to Blowing Sand for $4. Blowing Sand's decision to purchase the part from Flurry would eliminate all variable costs but none of the fixed costs. Blowing Sand has no other possible uses for the area currently dedicated to the thermostat production.
Required:
Calculate the effect on Blowing Sand's annual total costs if the thermostat is purchased from Flurry Company.
The total cost
by
Should Blowing Sand continue to make the thermostat or purchase the part from Flurry Company?
Blowing Sand should
the thermostat.
image

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