Stan Fawcett’s company is considering producing a gear assembly that it now purchases from Salt Lake Supply, Inc. Salt Lake Supply charges $4 per unit with a minimum order of 3,000 units. Stan estimates that it will cost $15,000 to set up the process and then $1.82 per unit for labor and materials.
(a) Draw a graph illustrating the crossover (or indifference) point.
(b) Determine the number of units where either choice has the same cost.