You are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options. For the purchase option, the firm can buy product A at $17 per unit. For the make option, the firm can produce product A based on the following cost estimation data. The firm has to pay a weekly rental payment of $9,200 for the production facility. With the use of this facility, the firm also has to hire five operators to help make product A. Each operator works eight hours per day, five days per week at the rate of $8 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $13 per unit of product A. a. Find a weekly amount of product A that provides the breakeven point for the firm. The breakeven point in this problem indicates the firm's indifference between purchasing or making product A. b. If the firm estimates the sale of product A to be 1,700 units per week, should it make or purchase product A? a. A weekly amount of product A that provides the breakeven point for the firm is 2700 units per week. (Round to the nearest whole number.) b. If the firm makes 1,700 units per week, the total cost will be $. (Round to the nearest dollar.)

You are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options. For the purchase option, the firm can buy product A at $17 per unit. For the make option, the firm can produce product A based on the following cost estimation data. The firm has to pay a weekly rental payment of $9,200 for the production facility. With the use of this facility, the firm also has to hire five operators to help make product A. Each operator works eight hours per day, five days per week at the rate of $8 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $13 per unit of product A. a. Find a weekly amount of product A that provides the breakeven point for the firm. The breakeven point in this problem indicates the firm's indifference between purchasing or making product A. b. If the firm estimates the sale of product A to be 1,700 units per week, should it make or purchase product A? a. A weekly amount of product A that provides the breakeven point for the firm is 2700 units per week. (Round to the nearest whole number.) b. If the firm makes 1,700 units per week, the total cost will be $. (Round to the nearest dollar.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Cost of Production

In economic theory, production costs are the costs incurred by an industrial organization when it engineers a project or provides a service that generates revenue and benefits. Labor costs, raw materials, consumable manufacturing costs, and general overhead sum up, accounting for production costs. Total cost data is calculated by combining total direct costs of materials, labor costs, and total production costs.

Question

You are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options. For the purchase option, the firm can buy product A at $17 per unit. For the make option, the firm can produce
product A based on the following cost estimation data. The firm has to pay a weekly rental payment of $9,200 for the production facility. With the use of this facility, the firm also has to hire five operators to help make product A. Each operator
works eight hours per day, five days per week at the rate of $8 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $13 per unit of product A.
a. Find a weekly amount of product A that provides the breakeven point for the firm. The breakeven point in this problem indicates the firm's indifference between purchasing or making product A.
b. If the firm estimates the sale of product A to be 1,700 units per week, should it make or purchase product A?
.....
a. A weekly amount of product A that provides the breakeven point for the firm is 2700 units per week. (Round to the nearest whole number.)
b. If the firm makes 1,700 units per week, the total cost will be $
(Round to the nearest dollar.)

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