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Bob's Company has two options to produce a product: Bobs could build their own factory for production, which requires $250,000 fixed cost and $15 variable
Bob's Company has two options to produce a product:
- Bobs could build their own factory for production, which requires $250,000 fixed cost and $15 variable cost per unit.
- Bobs could outsource the production to Harrys Company, which incurs $125,000 fixed cost and $35 variable cost per unit.
Assume Bobs can sell every unit it produces.
How many units of product will Bobs have to sell before the self-production method (a) becomes more cost-efficient than outsourcing
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