Oscar Lee’s company is considering producing a gear assembly that it now purchases from Okanagan Supply, Inc. Okanagan Supply charges $4 per unit with a minimum order of 3000 units. Stan estimates that it will cost $15 000 to set up the process and then $1.82 per unit for labour 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.