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Should the company outsource and why

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Mark Berenson is CEO of Montclair Electronics. He is currently producing 80,000 video telephones a year in his New Jersey plant, where fixed cost are $900,000 and the variable cost per unit is $5. By outsourcing to a Mexican firm, annual fixed cost payments will rise to $1 million.

a) When the variable cost of outsourcing is $4 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.

b) Should the company outsource and why?

Reference no: EM13505273

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