Question
A company wants to create a model to decide whether they should manufacture a particular product or outsource its production. The information regarding the production
A company wants to create a model to decide whether they should manufacture a particular product or outsource its production. The information regarding the production components is given below.
- Fixed Cost, FC = $25,000
- Material Cost per Unit, MC = $2.15
- Labor Cost per Unit, LC = $2.00
- Outsourcing Cost per Unit, O = $4.50
Build a spreadsheet model for the manufacturing cost and outsourcing cost. Construct a one-way data table with production volume as the column input and savings due to outsourcing as the output. Saving means the cost difference between manufacturing and outsourcing. Breakeven occurs when savings equal zero. Vary production volume from 0 to 100,000 in increments of 10,000. In which interval of production volume, does breakeven occur? Using Goal Seek, find the precise volume where the breakeven occurs. At what volume, there is no difference between the manufacturing cost and outsourcing cost?
please show every step on the excel sheet.
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