6. You are the new CEO of DualJet, a company that makes expensive, premium kitchen stoves for home use. You must decide whether to assemble the stoves in-house or to have a Mexican company do it. The fixed and variable costs for each option are as follows:

a. (**) Suppose DualJet’s premium stoves sell for $2500.
What is the break-even volume point for assembling in-house?

b. (*) At what volume level do the two capacity options have identical costs?

c. (**) Suppose the expected demand for stoves is 3000.
Which capacity option would you prefer from a cost perspective?

Transcribed Image Text:

Assemble in-house Contract with Mexican assembler FIXED VARIABLE COST COST $55,000 $620 $0 $880