A Company Has Two Alternatives for Meeting a Customer Requirement

question 62

Essay

A company has two alternatives for meeting a customer requirement for 5,000 units of a specialty molding. If done in-house, fixed cost would be $350,000 and variable cost is $20 per unit. Alternative two is to outsource for a total cost of $40 per unit. Determine the break-even quantity and determine if they should make the item in-house or outsource it.

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Definitions:

Harm

Damage or injury to a person or property.

Consumer

An individual who purchases goods or services for personal use rather than for manufacture or resale.

Liable

The state of being legally responsible for something, especially in the context of debts or legal judgments.

Warn Consumers

The act of informing consumers about potential risks, hazards, or defects associated with a product or service.