Question: A furniture manufacturer is assessing if it should make or
A furniture manufacturer is assessing if it should make or buy the wooden frames for upholstered dining room chairs. The forecast is for 100,000 chairs to be produced per year. The fixed costs per year to make the frames are $150,000 and the variable costs are $5/frame. The supplier’s bid is $8/frame. Does the cost analysis support insourcing or outsourcing the chair frames?
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