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Required: At what unit costs for materials would HMP be just indifferent between making and buying the 3,000 units of the fitting if all other costs remain as predicted? Enter your answer in 2 decimal palces. Indifference point per unit

Required: At what unit costs for materials would HMP be just indifferent between making and buying the 3,000 units of the fitting if all other costs remain as predicted? Enter your answer in 2 decimal palces. Indifference point per unit

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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[The following information applies to the questions displayed below.] Harbortown Marine Products (HMP) manufactures and sells various fixtures for boat cabins. One fixture uses a specialized fitting that is not used in any other HMP product. The management of HMP has considered outsourcing the fitting for several years but has never identified a suitable supplier. HMP has collected the following data on the cost of the fitting: Materials Labor Manufacturing overhead Total Rivard Fittings, a local auto supplier, contacts HMP and tells them that because of the loss of one of Rivard's customers, there is enough capacity to produce up to 5,000 units of the fitting monthly. Rivard has offered to sell HMP any quantity (up to 5,000 units monthly) at a price of $20 per fitting. $ 6.40 4.80 14.40 $ 25.60 If Rivard supplies all of the 3,000 fittings currently produced by HMP, HMP will avoid all of the variable overhead associated with the fitting and one-third of the fixed overhead. Management estimates that variable overhead for the fitting is $4.80 per unit. Exercise 4-40 (Static) Make or Buy with Uncertain Costs (LO 4-4) Harbortown management is concerned about future changes in material prices arising from volatility in the commodities market. Required: At what unit costs for materials would HMP be just indifferent between making and buying the 3,000 units of the fitting if all other costs remain as predicted? Enter your answer in 2 decimal palces. Indifference point per unit
Transcribed Image Text:[The following information applies to the questions displayed below.] Harbortown Marine Products (HMP) manufactures and sells various fixtures for boat cabins. One fixture uses a specialized fitting that is not used in any other HMP product. The management of HMP has considered outsourcing the fitting for several years but has never identified a suitable supplier. HMP has collected the following data on the cost of the fitting: Materials Labor Manufacturing overhead Total Rivard Fittings, a local auto supplier, contacts HMP and tells them that because of the loss of one of Rivard's customers, there is enough capacity to produce up to 5,000 units of the fitting monthly. Rivard has offered to sell HMP any quantity (up to 5,000 units monthly) at a price of $20 per fitting. $ 6.40 4.80 14.40 $ 25.60 If Rivard supplies all of the 3,000 fittings currently produced by HMP, HMP will avoid all of the variable overhead associated with the fitting and one-third of the fixed overhead. Management estimates that variable overhead for the fitting is $4.80 per unit. Exercise 4-40 (Static) Make or Buy with Uncertain Costs (LO 4-4) Harbortown management is concerned about future changes in material prices arising from volatility in the commodities market. Required: At what unit costs for materials would HMP be just indifferent between making and buying the 3,000 units of the fitting if all other costs remain as predicted? Enter your answer in 2 decimal palces. Indifference point per unit
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