Explain what should susan recommend, Operation Management

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Susan Gilbert, a purchasing agent for Wisconsin Plastic Inc (WSI) is reviewing quotations from suppliers for a new plastic gear. Susan plans to either place an order for 12000 years from a supplier with the least cost quotation or recommend that WSI purchase the necessary equipment and make the gear itself.

Relevant data for this make-or-buy decision are found below-

Make Buy

Fixed Cost of Equipment $60000 0

Variable cost per part $16 $20

What should Susan recommend? Make or Buy? Why? Choose one.

What should Susan recommend if the order size is increased by 25%? Make or Buy? Why?

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