Question
An organization is wanting to start making a new toy, which requires a special type of spring. The cost of buying the equipment to make
An organization is wanting to start making a new toy, which requires a special type of spring. The cost of buying the equipment to make the spring is $20,000. Once they buy this equipment they will be able to produce the springs in house with the help of a technician who's cost comes to $2/unit. The raw material cost for the spring is $5/unit. One of the leading spring supplier in the region is willing to produce the spring for the toy manufacturer and has provided a quote for $20/unit. If the toy manufacturer is planning to sell 500 units, what is the best option - Make or Buy? At what quantity of units, would it change from buy to make? Show your answers with calculation and draw a graph with the make and buy cost curves
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