Sweet Wave has discovered that its cherry pie filling it now manufactures at a cost of $$1\mathrm{.}00$ per unit could be bought elsewhere for $$0\mathrm{.}82$ per unit. Sweet Wave has fixed costs of $$0\mathrm{.}20$ per unit that cannot be eliminated by buying this unit. Sweet Wave needs $460,000$ of these units each year.

If Sweet Wave decides to buy the filling, rather than producing it$,$ they can shift the machinery and labor to making a special gluten free pie crust it now buys from another company. Sweet Wave uses approximately $500$ of these units each year. The cost of the unit is $$12\mathrm{.}66.$ To aid in the production of this unit, Sweet Wave would need to purchase a new machine at a cost of $$2,345,$ and the cost of producing the units would be $$9\mathrm{.}90$ a unit.

Instructions

Given the information above:

$($a$)$ Without considering the possibility of making the gluten free pie crust, evaluate whether Sweet Wave should buy or continue to make the cherry pie filling.

Do not use commas in your responses. For negative answers, please use $"-"$ before the number

Make Buy Change

Variable and fixed costs $Answer $1$ Question $2$

$Answer $2$ Question $2$

$Answer $3$ Question $2$

Fixed costs not eliminated Answer $4$ Question $2$

$Answer $5$ Question $2$

Total Annual costs $Answer $6$ Question $2$

Make Buy Change

Variable Costs $Answer $7$ Question $2$

Fixed Costs $Answer $8$ Question $2$

Purchase Price $Answer $9$ Question $2$

$Answer $10$ Question $2$

Total cost $Answer $11$ Question $2$

$Answer $12$ Question $2$

Should Sweet Wave buy or continue to make the cherry pie filling?

Answer $13$ Question $2$

b$1.$ What is Sweet Wave's opportunity cost if it chooses to buy the cherry pie filling and start manufacturing the gluten free pie crust?

Do not use commas in your responses. For negative answers, please use $"-"$ before the number

Cost of Buying $Answer $14$ Question $2$

Units used x Cost of Unit

Cost of Making $Answer $15$ Question $2$

Units used x Cost of producing each unit

Opportunity Cost $Answer $16$ Question $2$

b$2.$ If the company adds that amount to the cost of making the filling, it still does not bring the cost up to the total cost of buying the unit. Therefore, the company would still be better off to make the filling and buy the GF pie crust.

Make Part

Buy Part

Net Income

Increase $($Decrease$)$

Variable costs

$Answer $17$ Question $2$

$ $0$

$Answer $18$ Question $2$

Fixed costs

$Answer $19$ Question $2$

$Answer $20$ Question $2$

$0$

Purchase price

$0$

$Answer $21$ Question $2$

$Answer $22$ Question $2$

Total annual cost

$Answer $23$ Question $2$

$Answer $24$ Question $2$

$Answer $25$ Question $2$

Opportunity cost

$Answer $26$ Question $2$

Total cost

$Answer $27$ Question $2$

$Answer $28$ Question $2$

$Answer $29$ Question $2$