A firm is evaluating the alternative of manufacturing a part that is currently being outsourced from a supplier. The relevant information is provided below:

For in-house manufacturing:

Annual fixed cost = $80,000

Variable cost per part = $140

For purchasing from supplier:

Purchase price per part = $160

a) If demand is forecast to be 3,500 parts, should the firm make the part in-house or purchase it from a supplier?

b) The marketing department forecasts that the upcoming years demand will be 3,500 units. A new supplier offers to make the parts for $156 each. Should the company accept the offer? If so, how much can they save?

c) What is the maximum price per part the manufacturer should be willing to pay to the supplier if the forecast is 3,500 parts?