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A firm is evaluating the alternative of manufacturing a part that is currently being outsourced from a supplier. The relevant information is provided below:
Annual fixed cost = $80,000
Variable cost per part= $140
For purchase from supplier:
Purchase price per part= $160
a. Using the information, find the best decision if the demand is 5,000 parts.
b. Determine the break-even quantity at which the firm would be indifferent between manufacturing the part in-house or outsourcing it.
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