Given the Following Data for a Make-Or-Buy Decision Which Alternative Would You Select for a Quantity of 24,000

question 53

Short Answer

Given the following data for a make-or-buy decision: $$\begin{array} { l l l } \text { Alternative } & \text { Fixed Cost } & \text { Variable Cost } \\\hline \text { Buy } & \$ 0 \text { per year } & \$ 8 \text { per unit } \\\text { Make } & \$ 100,000 \text { per year } & \$ 4 \text { per unit }\end{array}$$ Which alternative would you select for a quantity of 24,000 units per year?

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Definitions:

Sinking Fund

A reserve fund established by a company to set aside revenue over time for the purpose of paying off debt or replacing a major asset in the future.

Bond Issue

The act of a borrower issuing bonds to raise money from investors willing to lend them money for a certain amount of time.

Pay Off Debt

The process of fully repaying borrowed money, including the principal amount and any accrued interest.

Redistribute

The act of allocating resources or wealth in a different manner, often aiming at a more equitable distribution.