What are the break-even points for each option

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Reference no: EM132300421

1. Suppose a manufacturer has identified the following options for obtaining a machined part. The manufacturer can

• buy the part at $200 per unit (including materials), or

• make the part on a numerically controlled semiautomatic lathe at $75 per unit (including materials) or

• make the part on a machining center at $15 per unit (including materials).

There is negligible fixed cost if the item is purchased: a semiautomatic lathe costs $80,000, and a machining center costs $200,000. Assume the semiautomatic lathe or the machining center would need to be pur-chased if these options are chosen and that the full cost of purchasing this equipment is considered in this decision. Also assume that the part sells for $300 each.

A) What would be the best choice if expected demand were:

500 units

1,00 units

2,500 units

B) What are the break-even points for each option? A Data Table can be useful for this analysis.

Reference no: EM132300421

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