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 $20 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 $20,000 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 $10 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $15 per unit of product A. Solve, 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 3,500 units per week, should it make or purchase product A?
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 $20 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 $20,000 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 $10 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $15 per unit of product A. Solve, 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 3,500 units per week, should it make or purchase product A?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
