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National Industries has three alternatives available to meet the demand of a particular product. They are as follows: (a) Manufacturing the product by using process
National Industries has three alternatives available to meet the demand of a particular product. They are as follows: (a) Manufacturing the product by using process A (b) Manufacturing the product by using process B (c) Buying the product from a vendor The details are as follows: Cost Elements Buy Manufacturing the product by using process A Manufacturing the product by using process B Fixed costlyear (RO) 9000 32000 Variable Cost/unit (RO) 65 Purchase price/unit (RO) 80 The annual demand of the product is 12000 units. (a) What should the company decide? Should the company make the product using process A or process B or buy it? (Give reasons for your recommendation) (10 Marks) (b) At what annual volume should the company prefer to manufacture the product by using process A? (Give reasons for your recommendation) (10 Marks) (c) At what annual volume should the company prefer to manufacture the product by using process B? (Give reasons for your recommendation) (10 Marks)
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