Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

6. Your company is trying to reduce supply-chain costs. There is one component that you are currently purchasing for $20 per unit. Your manufacturing unit

image text in transcribed
6. Your company is trying to reduce supply-chain costs. There is one component that you are currently purchasing for $20 per unit. Your manufacturing unit has said that they could make the component in-house at a cost of $5 per unit. However, there would be significant fixed costs of $200,000 for manufacturing equipment. The equipment has an expected lifetime of five years, with a salvage value equal to 10% of its original costs at the end of year 5 . Your company has a discount rate of 10% /year. (a) Determine the break-even quantity (i.e., how many components you would need to make per year, over the five-year lifetime of the equipment, in order to be indifferent between making and buying the component). (b) If the company uses 5,000 of these components per year, should they make or buy

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Social Media Handbook For Financial Advisors

Authors: Matthew Halloran

1st Edition

1118208013, 978-1118208014

More Books

Students also viewed these Finance questions