Instructions

Submission: Please submit your Excel spreadsheet with your work in it as part of your submission.

$1.$ Make or buy decision

Mystique Manufacturing needs to source a specially machined component for its new product and is considering two options: buy from a supplier or produce it in$-$house. The demand for the item is $10,000$ units per year.

Mystique estimates that its holding cost is $25\%$ per year, and has received the following quotes.

Option $1$: Buy from a supplier. PrecisionWorks has quoted Mystique a price of $$40$ per unit. Because the part requires special tooling, PrecisionWorks also requires a flat fee of $$900$ per batch. Mystique estimates that they will incur an additional $$100$ per order plus $$2\mathrm{.}75$ per unit in transportation costs.