A Manufacturing Company Needs to Know Whether to Make In-House

question 11

Essay

A manufacturing company needs to know whether to make in-house or buy an injection molding machine for its new fax machine production. The company expects to produce 9,000 units per year. The following estimates have been made:
$\begin{array}{|l|c|c|}\hline & \text { Make } & \text { Buy } \\\hline \text { Fixed cost per year } & \$ 9,000 & \$ 0 \\\hline \text { Variable cost per part } & \$ 6.45 & \$ 7.20 \\\hline\end{array}$
a.What is the annual cost to make an injection molding machine?
b.What is the annual cost to buy an injection molding machine?
c.At what volume are they indifferent regarding the decision to make or buy?

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