What is the break-even volume of internal process

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Reference no: EM13923724

The manager of Green Daisy Inc. is in the process of deciding whether to make or buy carburettors for its power lawn mowers. If Green Daisy decides to manufacture the carburetor, it could utilize one of two manufacturing processes. The first process would entail a variable cost of $17 per unit and an annual fixed cost of $200,000, while the second process would entail variable cost of $14 per unit and an annual fixed cost of $240,000. The manager knows of three vendors who are capable and willing to provide the carburetor. Vendor A charges $20 per unit for any volume up to 30,000 units and cannot supply Green Daisy’s need for volume above 30,000 units due to its capacity restrictions. Vendor B offers a price of $22 per unit for a demand of 1,000 units or less and $18 per unit for each unit above the 1,000 units. Vendor C’s price is $21 per unit for the first 1,000 units and $19 per unit for any additional units. The manager is unsure about what the demand is going to be for power lawnmowers. a) If the demand is forecasted to be 10,000, 20,000, 28,000, or 60,000 units, which alternative would be best from a cost standpoint? c) What is the break-even volume of internal process 2 if we use the best price external option?

Reference no: EM13923724

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