A company is selling a certain model of shoes with an annual demand of 3,000 units per year. To fulfil the demand, the company has the option of purchasing or manufacturing the shoes. If the shoes are purchased, the company will be charged $25 per unit plus a cost of $4 per order. The company has a production capacity of 8,000 units per year to manufactures the shoes. If the company decided to manufacture the shoes, it costs $50 to set up a production run and the cost of manufacturing one unit is $23. The annual holding cost is 10%. Assuming that no shortage is allowed:

Should the company purchase or produce the shoes?

Answer rating: 100% (QA)

To determine whether the company should purchase or produce the shoes lets calculate the costs assoc... View the full answer