Question
Suppose that you are a leather jacket producer. You can produce 23,815 unit of leather jackets per week for 48 weeks of operation per year.
Suppose that you are a leather jacket producer. You can produce 23,815 unit of leather jackets per week for 48 weeks of operation per year. Your goal is to produce in the market for seven years. The part of the production requires special zippers for the jackets. You can either make the zippers for the jackets in house or buy them from a different source. If you make the zippers in house, you face with annual labour costs: $3,000,000, annual safety regulation costs: $500,000 and annual material costs: $2,000,000. But, if you choose to buy the zippers from a different source, you need to have a special metal-zipper machine to make adjustment for your production. Therefore, you need to pay $405,000 for the metal-zipper machine, which has $45,000 salvage value at the end of 7 years. Furthermore, you face with annual maintaining costs including labour costs: $3,508,403 and additional overhead costs: $822,719. Using this information, find the unit cost of buy the zippers option with MARR 10%.
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