Gabriela Manufacturing must decide whether to insource (make) or outsource (buy) a new toxic-free carpet cleaner that works with its Miracle Carpet Cleaning Machine. If it decides to insource the product, the process would incur $300,000 of annual fixed costs and $1.50 per unit of variable costs. If it is outsourced, a supplier has offered to make it for an annual fixed cost of $120,000 and a variable cost of $2.25 per unit in variable costs.

(a) Construct a base-case spreadsheet model that shows both of these alternatives side-by-side. Use the same number of units (stored in a single cell) to drive the calculations.

(b) If the expected annual demand for the new cleaner is 300,000 units, what would you recommend that Gabriela Manufacturing do? Provide evidence to support your recommendation.

(c) Use Goal Seek to find the indifference point (where total costs are equal) between these two alternatives. Create a cell in your model that computes the difference between the total costs of the two alternatives before running Goal Seek.

(d) Construct an XY chart of total cost versus quantity. Graph both alternatives on the same chart. Use a Data Table to generate the values for the chart.