EBK OM
6th Edition
ISBN: 9781305888210
Author: Collier
Publisher: YUZU
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Question
Chapter 4, Problem 11PA
Summary Introduction
Interpretation:Whether manufacturer should accept the offer or not.
Concept Introduction:
Breakeven analysis of any industry shows volume of production required to remain profitable. Break even point is a situation where firm is at no profit no loss situation
Expert Solution & Answer
Answer to Problem 11PA
Manufacturer will save $19000 to accept the offer.
Explanation of Solution
Given information:
Inspection cost = $19
Demand = 8000 units
For current situation:
For third party inspection:
Break even analysis:
Demand (d)=8750 hard drives
Since actual demand is 8000 which is less than 8750
The manufacturer should accept the offer of third party as:
Manufacturer will save $19000 to accept the offer.
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