What is the cross-over point

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Reference no: EM13759685

A company is considering producing a gear assembly that it now purchases from a supplier. The supplier charges $4 per unit, with an additional one-time payment of $8,000 units. The company estimates that it will cost $15,000 to set up the process and then $1.5 per unit for labor and materials.

(a) What is the cross-over point? Please provide the formula, at least one step of calculation, and the correct answer.

(b) If the expected production volume is 5,000 units, which option gives a lower total cost? Please provide at least one step of calculation and the correct answer.

Reference no: EM13759685

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