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Question: A computer manufacturer needs 7,500 units of a component to complete an order for a distributor. If done in-house, the fixed cost would be$325,000 with variable cost at $25 per unit. Alternative two is to outsource for a total cost of $75 per unit with a set-up/tooling cost of $50,000 (fixed cost). The selling price for the item is $110. Get academic success with expert online assignment help for university students.
Answer the following questions:
a. Determine the breakeven quantity for each alternative.
b. Determine the breakeven quantity between the two alternatives. In other words, at what level of production the company would be indifferent between outsourcing the order and in-house production.
c. For the current order, should they make the item in-house or outsource it?
d. At what order quantity would it become optimal to make the item in-house rather than outsourcing it?
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