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Betty's Bed frames, Inc. purchases a key component of one of its products from a local supplier. The current purchase price is $1,569 per unit.
Betty's Bed frames, Inc. purchases a key component of one of its products from a local supplier. The current purchase price is $1,569 per unit. Annual component usage should increase from 150 to 750 units. Emphasis on reliability has prompted management to consider making the component in-house, rather than to continue buying it from the supplier. Fixed costs would increase by about $40,000 per year for the new equipment and tooling needed. The cost of raw materials and variable overhead would be about $1,100 per unit, and labor costs would be $300 per unit produced. Since Betty's Bed frames would be ordering 750 units instead of 150, they can count on a discount from the supplier. The discount of at least $ per unit would make the "buy" decision better than the "make" alternative if reliability is at least parity. (Enter your response rounded to the nearest whole number.) A global manufacturer of air conditioning units (ACUS) is considering outsourcing the manufacturing of fan used in the manufacturing of units. The company estimates that the annual fixed cost of manufacturing the part in-house, which includes equipment, maintenance, and management, amounts to $9 million. The variable cost of labor and materials are $12.00 per breaker. The company has an offer from a major subcontractor to produce the part for $18.00 per fan. Assume the subcontractor wants the company to share in the costs of the equipment. The ACU company estimates that the total cost would be $5 million, which also includes management oversight for the new supply contract. For this concession, the subcontractor will drop the per unit price to $14.00. Under this assumption, how many breakers would the ACU company need per year to make the in-house option least costly? The company should consume more than fans per year to make the manufacturing the part in-house option the least costly. (Enter your response rounded to the nearest whole number.)
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