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Company considers beginning the production of an appliance

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Jason company considers beginning the production of an appliance. Operations management department should decide whether to make the small engine for this product in the manufacturing plant, or buy it from an outside supplier.

If management decides to produce the engine, then there are 2 alternatives:

Option 1: Manufacture it by simple machines

Fixed Cost:     $16,000/year

Variable Cost: $7 per unit

option 2: Manufacture it by advanced machines

Fixed Cost:     $30,000/year

Variable Cost: $5 per unit

The purchase price of the engine from an outside supplier is $9 per unit.

a) What should be the production volume to for Jason to choose to manufacture the engine by simple machines?

b) What should be the production volume to for Jason to choose to manufacture the engine by advanced machines?

c) What should be the production volume to for Jason to purchase the engine from an outside supplier?

Reference no: EM131468346

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