Suppose that a firm has the option to make or buy a part. Its annual requirement is 11,000 units. A supplier is able to supply the part at $10 per unit. The firm estimates that it costs $400 to prepare the contract with the supplier. To make the part, the firm must invest $25,000 in equipment, and the firm estimates that it costs $8 per unit to make the part.

1. What is the break-even point? Round your answer to the nearest whole number.

2. What is the total cost at the break-even point? Round your answer to the nearest dollar.

 

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This question is essentially dealing with the make or buy decision It requires calculating the break... View the full answer