A firm is evaluating the alternative of manufacturing a part that is currently being outsourced from a supplier. The relevant information is provided below:
For in-house manufacturing:
Annual fixed cost = $100,000
Variable cost per part = $140
For purchasing from supplier:
Purchase price per part = $160
a. Using this information, find the best decision if the demand is 4,000.
b. Determine the break-even quantity for which the firm would be indifferent between manufacturing the part in-house or outsourcing it.