A Company Asked One of Their Analysis Team to Analyze

question 53

Essay

A company asked one of their analysis team to analyze and create models that help decide whether they should manufacture a particular product or outsource its production. The different components are given below.
Fixed Cost, FC = $25,000
Material Cost per Unit, MC = $2.15
Labor Cost per Unit, LC = $2.00
Outsourcing Cost per Unit, O = $4.50
a. Build a spreadsheet model and then construct a one-way data table with production volume as the column input and savings due to outsourcing as the output. Breakeven occurs when savings equal zero. Vary production volume from 0 to 100,000 in increments of 10,000. In which interval of production volume does breakeven occur?
b. Using the appropriate Excel tool, find the exact breakeven point.

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Definitions:

Investing Activities

Transactions involving the purchase and sale of long-term assets and other investments not considered cash equivalents.

Cash Flow

The total amount of money being transferred into and out of a business, representing the operational, investing, and financing activities over a period.

Long-term Debt

Financial obligations or loans that are due for repayment beyond a period of one year.

Dividends Payable

Liabilities representing a company's obligation to pay shareholders a declared dividend.