Question: Answer questions 2A through 2E completely 2. Consider a hypothetical situation in which a firm has the option to make or to buy a part.

Answer questions 2A through 2E completely

2. Consider a hypothetical situation in which a firm has the option to make or to buy a part. Its annual requirement is 15,000 units. A supplier is able to supply the part at $7 per unit. The firm estimates that it cost $500.00 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 cost $5.00 per unit to make the part. TO BUY OPTION TO MAKE OPTION FIXED COST VARIABLE COST a. What is the breakeven quantity (4points) b. How much will it cost to MAKE OR BUY at the Breakeven Quantity TO MAKE (3points) TO BUY (3points) c. At the annual required production quantity what would it cost the firm: TO MAKE (2 points) TO BUY (2 points) d. Now graphically illustrate your answers from 'a' to part 'c' Make sure you identify the cost differential on the graph and show all your calculated cost on the axis on the graph. e. Briefly describe your analysis from the calculation and the graph (2points)

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