What is the breakeven quantity

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Reference no: EM132297132

A Las Vegas, Nevada, manufacturer has the option to make or buy one of its component parts. The annual requirement is 20,000 units. A supplier is able to supply the parts for $10 per piece. The firm estimates that it costs $600 to prepare the contract with the supplier. To make the parts in-house, the firm must invest $50,000 in capital equipment, and the firm estimates that it costs $8 per piece to make the parts in-house.

Assuming that cost is the only criterion, use breakeven analysis to determine whether the firm should make or buy the item. (Do your own work, individual assignment) (No need to upload file).

1. What is the breakeven quantity?

2. What is the total cost to Buy the item? Hint: Q=20000

3. What is the total cost to Make the item? Hint: Q=20000

4. Should the company Buy or Make? What is the cost savings for using your decision?

Reference no: EM132297132

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