A manufacturer has a choice of purchasing and installing a heat-treating oven or having the heat treating done by an outside supplier. The manufacturer has developed the following cost estimates:

a. What is the cost equalization point?

b. Should the company have the heat treating done by an outside supplier if the annual volume is 3000 units? 5000 units?

c. What would be the unit (average) cost for the selected process for each of the volumes in b above?

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Purchase Services Heat Treat In-house Fixed cost $28,000.00 $0.00 Variable cost $10.00 $17.00