Question
A company is currently using a supplier to make required components. The s changes an annual scup cost of $5,000 regardless of the number of
A company is currently using a supplier to make required components. The s changes an annual scup cost of $5,000 regardless of the number of parts the company purchases in a single year. In addition to this annual setup fee, the supplier uses the following pricing scheme: # of units $/unit 1-100 $1,000 each 101-500 $800 each 501-750 $600 each 751 or more $500 each The company is now exploring the possibility of producing the same component in-house. The company expects to need more than 750 units per year for the next 5 years. The following information describes their in-house production solution: The annual Capital Recover & Return for the needed equipment - $300,000 per year Material Cost per unit - $250 Annual Operation and Maintenance Costs - $100.000 Annual Labor Costs - $150,000 Annual Overhead Costs $50,000 = Question: What is the Breakeven Quantity for this Make / Buy Decision
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