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Mgt is considering an outsourcing decision (make/buy) for a part. The cost figures are as follows: Fixed costs = $300,000; Variable cost = $80/unit; Buy
Mgt is considering an outsourcing decision (make/buy) for a part. The cost figures are as follows: Fixed costs = $300,000; Variable cost = $80/unit; Buy cost = $90/unit landed (including frt and other costs). What's the break even demand quantity? (BEP = qty at which total cost to make = total cost to buy) Hint: TCMake = FC (fixed investment needed) + VC (variable cost/unit in house) * D (demand in units) TCBuy = C (Buy landed cost) * D BEP occurs at the qty at which TCB = TCM So find out the Demand (BEP qty) at which TCB=TCM C * D = FC + VC*D and solve for D (BEP qty)
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