You are in charge of launching your new purse brand, and are deciding whether to produce them in-house or hire someone to make them. Making them in-house will require $1,250,000 upfront, for things like a 10-year warehouse lease, licenses, union fees, machine retooling, etc., but each purse will cost $17 to make. Alternatively, a quote from another company tells you that they can make them for $25 each, and will only charge you $10,000 for licensing and contract fees. The marketing department tells you that you can expect 90,000-unit sales.

Question 16: What are the formulae for the break-even analysis? total fixed cost/(price - average variable costs)

16a.: The formula for the Make cost.

16b.: The formula for the Buy cost.

16c.: The formula for the break-even point. (UNITS)=fixed cost / (unit sales price - unit variable cost)($DOLLARS)=Fixed Costs Contribution Margin

Question 17: What is the break-even point?

Question 18: Should you make this product in-house, or buy them?