Question 3. (8 points)

Eagle Manufacturing considers beginning the production of an appliance. Operations management department should decide whether to make the small engine for this product in the manufacturing plant, or buy it from an outside supplier.

If management decides to produce the engine, then there are 2 alternatives:

(1) Manufacture it by simple machines Fixed Cost: $15,000/year Variable Cost: $8.5 per unit

(2) Manufacture it by advanced machines Fixed Cost: $40,000/year Variable Cost: $5 per unit

(3) The purchase price of the engine from an outside supplier is $10.5 per unit.

NOTE 1: SHOW ALL YOUR WORK. USE 4 DECIMAL PLACES IN YOUR CALCULATIONS.

NOTE 2: YOU SHOULD PROVIDE AND EXPLAIN ALL STEPS IN YOUR SOLUTION IN AN EXCEL WORKSHEET. NAME YOUR WORKSHEET AS Q3.

(3 points) What should be the production volume to for Eagle to choose to manufacture the engine by simple machines?

(3 points) What should be the production volume for Eagle to choose to manufacture the engine by advanced machines?

(2 points) What should be the production volume to for Eagle to purchase the engine from an outside supplier?