Should the company outsource and why

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Reference no: EM131860977

Mark Berenson is CEO of Montclair Electronics. He is currently producing 100,000 video telephones a year in his New Jersey plant, where fixed costs amount to $1.5 million and the variable cost per unit is $4.

By outsourcing to a Mexican firm, they will be able to reduce the annual fixed cost to $1 million.

When the variable cost of outsourcing is $5 per unit, what is the break-even quantity in this case? Please provide the formula, at least one step of calculation, and the correct answer for full credit.

Should the company outsource? And why?

Reference no: EM131860977

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