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A firm plans to begin production of a new small appliance. The manager must decide whether to purchase the motors for the appliance from a vendor at $9 each or to produce them in-house. Either of two processes could be used for in-house production; Process A would have an annual fixed cost of $205,000 and a variable cost of $7 per unit, and Process B would have an annual fixed cost of $160,000 and a variable cost of $8 per unit. Determine the range of annual volume for which each of the alternatives would be best. (Round your first answer to the nearest whole number. Include the indifference value itself in this answer.)

A firm plans to begin production of a new small appliance. The manager must decide whether to purchase the motors for the appliance from a vendor at $9 each or to produce them in-house. Either of two processes could be used for in-house production; Process A would have an annual fixed cost of $205,000 and a variable cost of $7 per unit, and Process B would have an annual fixed cost of $160,000 and a variable cost of $8 per unit. Determine the range of annual volume for which each of the alternatives would be best. (Round your first answer to the nearest whole number. Include the indifference value itself in this answer.)

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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A firm plans to begin production of a new small appliance. The manager must decide whether to purchase the motors for the appliance from a vendor at $9 each or to produce them in-house. Either of two processes could be used for in-house production: Process A would have an annual fixed cost of $205,000 and a variable cost of $7 per unit, and Process B would have an annual fixed cost of $160,000 and a variable cost of $8 per unit. Determine the range of annual volume for which each of the alternatives would be best. (Round your first answer to the nearest whole number. Include the indifference value itself in this answer.)
Transcribed Image Text:A firm plans to begin production of a new small appliance. The manager must decide whether to purchase the motors for the appliance from a vendor at $9 each or to produce them in-house. Either of two processes could be used for in-house production: Process A would have an annual fixed cost of $205,000 and a variable cost of $7 per unit, and Process B would have an annual fixed cost of $160,000 and a variable cost of $8 per unit. Determine the range of annual volume for which each of the alternatives would be best. (Round your first answer to the nearest whole number. Include the indifference value itself in this answer.)
For annual volumes of or less, is best. For annual volumes above that amount, is best.
Transcribed Image Text:For annual volumes of or less, is best. For annual volumes above that amount, is best.
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