Problem 2 (10 points)

You are given the following information:

Costs	Make Option	Buy Option
Fixed Cost	$25,000	$3,000
Variable Cost	$8	$12

1. Find the break-even quantity and the total cost at the break-even point. (4 points)
2. If the requirement is 4,500 units, is it more cost-effective for the firm to buy or make the components? What is the cost savings for choosing the cheaper option? (3 points)
3. If the requirement is 6,000 units, is it more cost-effective for the firm to buy or make the components? What is the cost savings for choosing the cheaper option? (3 points)