Excel Online Structured Activity: Break$-$Even Analysis

A Las Vegas, Nevada, manufacturer has the option to make or buy one of its component parts. The annual requirement is $18,000$ units. A supplier can supply the parts for $$8$ each. The firm estimates that it costs $$400$ to prepare the contract with the supplier. To make the parts in$-$house, the firm must invest $$45,000$ in capital equipment and estimates that the parts cost $$6$ each.

The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

Questions

a$.$ Assuming that cost is the only criterion, use break$-$even analysis to determine whether the firm should make or buy the item. What is the break$-$even quantity? Round your answer to the nearest whole number.

$$ units

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

$ $$

The firm should $$ the item.

b$.$ Calculate the total costs for both options at $18,000$ units. Round your answers to the nearest dollar.

Total cost $($make option$)$: $ $$

Total cost $($buy option$)$: $ $$

What is the cost savings for choosing the cheaper option? Round your answer to the nearest dollar.

Break$-$Even Analysis