Given the Following Data for a Make-Or-Buy Decision What Would Be Your Total Costs for the Preferred Alternative

question 48

Short Answer

Given the following data for a make-or-buy decision: $$\begin{array} { l l l } \text { Alternative } & \text { Fixed Cost } & \text { Variable Cost } \\\hline \text { Buy } & \$ 0 \text { per year } & \$ 8 \text { per unit } \\\text { Make } & \$ 100,000 \text { per year } & \$ 4 \text { per unit }\end{array}$$ What would be your total costs for the preferred alternative, for 32,000 units per year?

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Definitions:

Issuing Corporation

A company that is in the process of offering its securities (stocks or bonds) for sale to the public or investors.

Outstanding Shares

The total shares of a corporation that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.

Authorized Shares

The maximum number of shares of stock a corporation can issue as specified in its charter.

Investors

Individuals or entities that allocate capital to different types of investments with the expectation of generating a future return.