Suppose that a firm has the option to make or buy a part. Its annual requirement is 11,000 units. A supplier is able to supply the part at $6 per unit. The firm estimates that it costs $800 to prepare the contract with the supplier. To make the part, the firm must invest $29,000 in equipment, and the firm estimates that it costs $3 per unit to make the part. COSTSMAKE OPTIONBUY OPTIONFixed Cost$29,000$800 Variable Cost$3$6 Annual Requirement = 11,000 units1. What is the break-even point? Round your answer to the nearest whole number.2. What is the total cost at the break-even point? Round your answer to the nearest dollar.3. What is the total cost for the make option? Round your answer to the nearest dollar.

A make-or-buy decision alludes to a demonstration of utilizing cost-advantage to make an essential…

Answered: Suppose that a firm has the option to…

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...

See similar textbooks

Related questions

Question

Suppose that a firm has the option to make or buy a part. Its annual requirement is 11,000 units. A supplier is able to supply the part at $6 per unit. The firm estimates that it costs $800 to prepare the contract with the supplier. To make the part, the firm must invest $29,000 in equipment, and the firm estimates that it costs $3 per unit to make the part.