Gabriela Manufacturing must decide whether to insourceor outsource a new toxic-free miracle carpet cleaner that workswith its Miracle Carpet Cleaning Machine. If it decides toinsource the product, the process would incur $300,000 of annualfixed costs and $1.50 per unit of variable costs. If it is outsourced,a supplier has offered to make it for an annual fixed cost of$120,000 and a variable cost of $2.25 per unit in variable costs.(a) Given these two alternatives, determine the indifferencepoint (where total costs are equal).(b) If the expected demand for the new miracle cleaner is300,000 units, what would you recommend that GabrielaManufacturing do?
Gabriela Manufacturing must decide whether to insourceor outsource a new toxic-free miracle carpet cleaner that workswith its Miracle Carpet Cleaning Machine. If it decides toinsource the product, the process would incur $300,000 of annualfixed costs and $1.50 per unit of variable costs. If it is outsourced,a supplier has offered to make it for an annual fixed cost of$120,000 and a variable cost of $2.25 per unit in variable costs.(a) Given these two alternatives, determine the indifferencepoint (where total costs are equal).(b) If the expected demand for the new miracle cleaner is300,000 units, what would you recommend that GabrielaManufacturing do?
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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Gabriela Manufacturing must decide whether to insource
or outsource a new toxic-free miracle carpet cleaner that works
with its Miracle Carpet Cleaning Machine. If it decides to
insource the product, the process would incur $300,000 of annual
fixed costs and $1.50 per unit of variable costs. If it is outsourced,
a supplier has offered to make it for an annual fixed cost of
$120,000 and a variable cost of $2.25 per unit in variable costs.
(a) Given these two alternatives, determine the indifference
point (where total costs are equal).
(b) If the expected demand for the new miracle cleaner is
300,000 units, what would you recommend that Gabriela
Manufacturing do?
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