1.Hahn Manufacturing purchases a key component of one of its products from a local supplier. The current purchase price is $1500 per unit. Efforts to standardize parts succeeded to the point that this same component can now be used in 5 different products. Annual component usage should increase from 150 to 750 units. Management wonders whether it is time to make the component in-house, rather than to continue buying it from the supplier. Fixed costs would increase by about $40 000 per year for the new equipment and tooling needed. The cost of raw materials and variable overhead would be about $1100 per unit, and labor costs would be $300 per unit.

What is the break-even quantity? Should Hahn make or buy?

The company takes into consideration the idea to sell excess components if they decide to go on the in-house alternative. What should be the selling price considering their total manufacturing capacity will be 1000 units? Is this a good idea or not? Explain.