Question
A company is considering outsourcing its production operations to a third-party manufacturer. The outsourcing company offers two pricing options: Option A charges a fixed fee
A company is considering outsourcing its production operations to a third-party manufacturer. The outsourcing company offers two pricing options: Option A charges a fixed fee of $80,000 per month, while Option B charges a variable fee of $0.50 per unit produced. Using Cost-Volume-Profit (CVP) analysis, determine which pricing option is more cost-effective for the company based on its expected production volume and sales projections. Discuss the implications of the chosen pricing option for the company's cost structure and profitability.
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