3. If you had an order for 16000 units would you recommend in-house production or outsourcing?

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A manufacturing firm is considering whether to produce or outsource the production of a new product. If they produce the item themselves, they will incur a fixed cost of $950,000 per year, but if they outsource overseas there will be a fixed cost of $1.5 million per year. The advantage of outsourcing overseas is that the variable cost is $0.95 per unit. If they produce the item themselves, the variable cost is $43 per unit. Regardless of where these devices are made, they will sell for $98 each. a. (6 points) For each alternative (i.e., making and outsourcing), calculate the break-even quantity. b. (4 points) What is the break-even quantity between making and outsourcing? A manufacturing firm is considering whether to produce or outsource the production of a new product. If they produce the item themselves, they will incur a fixed cost of $950,000 per year, but if they outsource overseas there will be a fixed cost of $1.5 million per year. The advantage of outsourcing overseas is that the variable cost is $0.95 per unit. If they produce the item themselves, the variable cost is $43 per unit. Regardless of where these devices are made, they will sell for $98 each. a. (6 points) For each alternative (i.e., making and outsourcing), calculate the break-even quantity. b. (4 points) What is the break-even quantity between making and outsourcing?

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