firm is planning to set up a company to satisfy the demand for a particular item. The item may be purchased for $25 per unit or manufactured at a rate of 10,000 units per year for $23. If purchased, the order cost is $5, compared to a $50 set up cost for manufacture. The annual demand for the item is 2500 units, and the holding cost is the 10% of unit cost. Should she purchase the item externally or produce it internally?
firm is planning to set up a company to satisfy the demand for a particular item. The item may be purchased for $25 per unit or manufactured at a rate of 10,000 units per year for $23. If purchased, the order cost is $5, compared to a $50 set up cost for manufacture. The annual demand for the item is 2500 units, and the holding cost is the 10% of unit cost. Should she purchase the item externally or produce it internally?
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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Question
![firm is planning to set up a company to satisfy the demand for a particular
item. The item may be purchased for $25 per unit or manufactured at a rate of
10,000 units per year for $23. If purchased, the order cost is $5, compared to a
$50 set up cost for manufacture. The annual demand for the item is 2500 units,
and the holding cost is the 10% of unit cost. Should she purchase the item
externally or produce it internally?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0df43032-4a38-4e14-ba56-039065cf4a5e%2F4db3f80d-995c-46b7-9fd5-34e7d9dcf0bb%2Fy2qyeb_processed.jpeg&w=3840&q=75)
Transcribed Image Text:firm is planning to set up a company to satisfy the demand for a particular
item. The item may be purchased for $25 per unit or manufactured at a rate of
10,000 units per year for $23. If purchased, the order cost is $5, compared to a
$50 set up cost for manufacture. The annual demand for the item is 2500 units,
and the holding cost is the 10% of unit cost. Should she purchase the item
externally or produce it internally?
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