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 $300 $7 COSTS 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 Questions 1. What is the break-even point? Round your answer to the nearest whole number. (Ctrl) -
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 $300 $7 COSTS 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 Questions 1. What is the break-even point? Round your answer to the nearest whole number. (Ctrl) -
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
1
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7 Variable (per unit)
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Calculation Mode: Automatic Workbook Statistics
Total Cost (Make)
Total Cost (Buy)
Cost Difference (Make - Buy)
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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
Expert Solution
Step 1: Introduction of break-even point
The Break-Even Point (BEP) is the point at which a company's revenue production equals its total costs and begins to create a profit. The break-even analysis assists the company in determining the smallest amount of sales required to generate profitability. Management can make high-level business decisions using the margin of safety reports. Cost is monitored and controlled: Fixed and variable costs can have an impact on a company's profit margin.
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