You are the new CEO of Dualjet, a company that makes expensive premium kitchen stoves for home use. You must decide whether to assemble the stoves in-house or to have a Mexican company do it. The fixed and variable costs for each option are as follows:
a. Suppose DualJet’s premium stoves sell for $2,500.
What is the break-even volume point for assembling the stoves in-house?
b. At what volume level do the two capacity options have identical costs?
c. Suppose the expected demand for stoves is 3,000.
Which capacity option would you prefer, from a cost perspective?

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FIXED COST VARIABLE COST $55,000 $0 $620 $880 Assemble in-house Contract with Mexican assembler