A manager is trying to decide whether to purchase a certain part or to have it produced internally. Internal production could use either of two processes. One would entail a variable cost of $12 per unit and an annual fixed cost of $280,000; the other would entail a variable cost of $15 per unit and an annual fixed cost of $221,000. Three vendors are willing to provide the part. Vendor A has a price of $17 per unit for any annual quantity up to 26,000 units. Vendor B has a price of $20 per unit if demand is 1,000 units or less, but $16 per unit (for all units) if demand is greater. Vendor C offers a price of $19 per unit for the first 1,000 units, and $17 per unit for additional units. a-1. If the manager anticipates an annual demand of 10,000 units, which alternative would be best from a cost standpoint?

multiple choice 1

Vendor A

Vendor B

Vendor C

Internal 1

Internal 2

a-2. If the manager anticipates an annual demand of 70,000 units, which alternative would be best from a cost standpoint? multiple choice 2

Vendor A and Internal 1

Vendor B and Internal 2

Vendor C and Internal 1

Vendor C and Internal 2

Vendor B and Internal 1

b-1. Determine the range for which each alternative is best?

Range	Optimal Choice
1 to 1000	(Click to select) Vendor A Vendor B Vendor C Internal 1 Internal 2
1,001 to 70,000	(Click to select) Vendor A Vendor B Vendor C Internal 1 Internal 2
70,000 or more	(Click to select) Vendor A Vendor B Vendor C Internal 2 Internal 1

b-2. Are there any alternatives that are never best, If so, which ones?

multiple choice 6

Internal 2 and Vendor B are never best.

Internal 2 and Vendor C are never best.

Internal 1 and Vendor A are never best.