You currently make a part on old equipment at a cost of $25 / unit. The annual fixed cost for this equipment is $50,000. You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $250,000 / year (see table).

ALTERNATIVE FIXED COST VARIABLE COST

Buy $250,000 per year $15 per unit

Make $50,000 per year $25 per unit

a. What is the break-even quantity between buying and making? (6pts)

b. What are total costs to buy an annual quantity of 40,000 units?(6pts)

c. What are total costs to make a quantity of 40,000 units per year?(6pts)

d. For what range of output would you prefer to buy? (1pt)

e. For what range of output would you prefer to make? (1pt)