Question
1. A company is trying to decide whether to buy a part from suppliers, produce the part while using manual assembly, or produce the part
1. A company is trying to decide whether to buy a part from suppliers, produce the part while using manual assembly, or produce the part with an automated assembly system. The company expects an annual volume of 185,000 parts.
Here are the cost data for each alternative:
Buy Produce- Manual Assembly Produce- Automated Assembly
Fixed cost per year $0 $260,000 $875,000
Variable cost per part $18.60 $16.75 $16.25
a. Based on these data, which alternative is best?
b. At what annual volume of the part would the company be indifferent between buying the part and producing the part with automated assembly?
c. At what annual volume of the part would the company be indifferent between producing the part with manual assembly and with automated assembly?
d. What other considerations should be important in the decision?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started