Question
Abby Company currently produces everything in-house. Fixed costs are $1,035,378, and variable costs per unit are $1.04. A third party approaches Abby and offers to
Abby Company currently produces everything in-house. Fixed costs are $1,035,378, and variable costs per unit are $1.04.
A third party approaches Abby and offers to outsource the production. If Abby accepts the contract, she can bring her bring her own fixed costs down to $372,681. However, she would need to pay a flat fee of $191,811 to the third party plus an additional $2.16 per unit that they produce for her.
How many units would Abby have to sell to be indifferent between the two options (i.e., at what Q are the two options equally expensive?
Round your answer to the nearest whole number.
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