Mark makes bikes. Or at least he has been for the last 10 years. He employs 5 workers and pays each $35,000 per year. The material and miscellaneous costs amount to $82.67 per bike. Carver approached Mark as an alternative to building their own bikes, since Carver Industries makes 1000's of bikes per year right now. Carver requires a yearly fee of $200,000 plus only $57.50 per bike. Last year, Mark's firm produced 1250 bikes.

a. What was the total cost Mark experienced last year (25%)

b. What would the cost have been if Mark would have used Carver Industries last year? (25%)

c. What is the indifference quantity between the two alternatives? (25%)

d. If Mark expects the special patch demand to be 2250 orders next year, should he use Carver Industries? In doing this, how much would he save over the alternative?