If production volume is 11,000, what will be the total outsourcing cost?

a. $55,000

b. $110,000

c. $82,500

d. $205,000

e. none of the above

A company asked one of their analysis team to create a model that helps decide whether they should manufacture a particular product or outsource its production. The following influence diagram and the spreadsheet model illustrate how to calculate the difference in cost of manufacturing and outsourcing. Difference in Cost of Manufacturing Total Manufacturing Cost Total Outsourcing Cast Purchase Cost per Unit Fixed Cost Variable Cost Quantity Required Manufacturing Cost per Unit Parameters FC (Fixed Cost of manufacturing) VC (Per-Unit variable cost of manufacturing) P (Per-Unit variable cost of purchasing) 320,000 4.5 5.0 11.000 Model 9 (Quantity) TMC (Total cost to produce) TPC (Total cost to outsource) Savings due to Outsourcing