What was the total cost mike experienced last year for lures

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Reference no: EM133487825

Case Study: Mike Fulow makes fishing lures.Currently, Mike employs sevenlure makerseach with an annual salary of $34,000. Mike estimates the cost per lureto make is $1.63 each. Mike was recently approached by Mega Lure company that claims that they canproduce the same luresfor a fixed (one time per year) fee of $350,000 and will charge only $1.17 per lure (and that includes delivery). Last year, a total of 200,000lures were produced by Mike's company.

Question a. What was the total cost Mike experienced last year for lures?

Question b. What would the cost have been if Mikewould have used Mega Lurelast year?

Question c. What is the indifference quantity between the two alternatives?

Question d. If Mike expects the special patch demand to be 500,000 orders next year, should he use Mega Lures? In doing this, how much would he save over the alternative?

Reference no: EM133487825

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