Suppose that a firm has the option to make or buy a part. Its annual requirement is 17,000 units. A supplier can supply the part at $7 per unit. The firm estimates that it costs $300 to prepare the purchase contract. To make the part, the firm must invest $27,000 in equipment, and the firm estimates that it would cost $5 per unit to make the part. BUY OPTION COSTS MAKE OPTION Fixed Cost $27,000 Variable Cost $5 Annual Requirement = 17,000 units $300 $7 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet
Suppose that a firm has the option to make or buy a part. Its annual requirement is 17,000 units. A supplier can supply the part at $7 per unit. The firm estimates that it costs $300 to prepare the purchase contract. To make the part, the firm must invest $27,000 in equipment, and the firm estimates that it would cost $5 per unit to make the part. BUY OPTION COSTS MAKE OPTION Fixed Cost $27,000 Variable Cost $5 Annual Requirement = 17,000 units $300 $7 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Please answer in excel with formula
Transcribed Image Text:y Good to go
Suppose that a firm has the option to make or buy a part. Its annual requirement is 17,000 units.
A supplier can supply the part at $7 per unit. The firm estimates that it costs $300 to prepare the
purchase contract. To make the part, the firm must invest $27,000 in equipment, and the firm
estimates that it would cost $5 per unit to make the part.
Questions
COSTS
BUY
OPTION
$300
$7
MAKE OPTION
Fixed Cost
$27,000
Variable Cost
$5
Annual Requirement = 17,000 units
The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and
perform the required analysis to answer the questions below.
Open spreadsheet
Search
1. What is the break-even point? Round your answer to the nearest whole number.
(Ctrl)
Focus
Transcribed Image Text:A
7 Variable (per unit)
8
0 0 0 1 1 1 3 1 3 4 5 8 8 8 8 8 8 8 8 8 8 8 6 5
9
NX
INT
WATES
15
16
17
18
19
20
21
22
23
24
25
26
27
28
1 of 1
29
30
31
S
B
=
$5.00
C
Difference (Fixed Costs)
Difference (Variable Costs)
$7.00
Break-even Units
Break-even Cost
4+
Sheet1
Calculation Mode: Automatic Workbook Statistics
Total Cost (Make)
Total Cost (Buy)
Cost Difference (Make- Buy)
Optimal Decision
D
Formulas
O Search
F
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
G
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