Make$-$or$-$buy decision is choosing between manufacturing a product in$-$house or purchasing it from an external supplier.

Suppose a manufacturer needs to produce a custom aluminium housing for a particular customer order. Because it currently does not have the equipment necessary to make the housing, it would have to acquire machines and tooling at a fixed cost $($net of salvage value after the project is complete$)$ of $$250,000.$ The variable cost of production is estimated to be $$20$ per unit. The firm can outsource the housing to a metal fabricator at a cost of $$35$ per unit. The customer order is for $12,000$ units.

Tasks:

$1.$ In this situation to make$-$or$-$buy decision, calculate the quantity produced using equation Q$=$FC$/($VC$2-$VC$1).$

$2.$ Manufacture a product in$-$house or purchase it from an external supplier. What should they do$?$ Justify your response.

$3.$ Explain why outsourcing is essential for an extended supply chain and a global supply chain.