Scenario 12.1 You Currently Make a Part on Old Equipment at a at a Cost

question 25

Multiple Choice

Scenario 12.1
You currently make a part on old equipment at a cost of $50,000 per year and a variable cost of $20 / unit. You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year. The following table summarizes the details of this make versus buy decision.

-Use Scenario 12.1 to answer the question. What is the break even quantity between buying and making?

• A) 30,000 units per year
• B) 40,000 units per year
• C) 50,000 units per year
• D) 60,000 units per year

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Definitions:

Foot-In-The-Door

A persuasion technique where a small request is followed by a larger request, believing agreement to the first will increase the chances of agreement to the second.

Reciprocity

Reciprocity refers to a mutual exchange of privileges or interactions between two parties, where both benefit from the exchange.

Indebtedness

The feeling of owing something, whether emotional or financial, to another person or entity.

Major Components

Essential parts or factors that constitute a larger system or complex entity.