Question
Elly Industries is a multi-product company that currently manufactures 30,000 units of Part MR24 each month for use in production. The facilities are now being
Elly Industries is a multi-product company that currently manufactures 30,000 units of Part MR24 each month for use in production. The facilities are now being used to produce per month. If Elly were to buy Part MR24 from an outside supplier, the facilities would be idle, but its fixed costs would continue at 40 per cent of its present amount. The variable production costs of Part MR24 are $11 per unit.
a. If Elly Industries can obtain Part MR24 from an outside supplier at a unit purchase price of $12.875, what is the monthly usage at which it will be indifferent between purchasing and making Part MR24?
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