You are asked to recommend whether a firm should make or purchase product A. The following...
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You are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options. For the purchase option, the firm can buy product A at $17 per unit. For the make option, the firm can produce product A based on the following cost estimation data. The firm has to pay a weekly rental payment of $14,400 for the production facility. With the use of this facility, the firm also has to hire five operators to help make product A. Each operator works eight hours per day, five days per week at the rate of $12 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $11 per unit of product A. a. Find a weekly amount of product A that provides the breakeven point for the firm. The breakeven point in this problem indicates the firm's indifference between purchasing or making product A. b. If the firm estimates the sale of product A to be 1,000 units per week, should it make or purchase product A? a. A weekly amount of product A that provides the breakeven point for the firm is b. If the firm makes 1,000 units per week, the total cost will be $. (Round to the nearest dollar.) If the firm purchases 1,000 units per week, the total cost will be $. (Round to the nearest dollar.) The firm should units per week. (Round to the nearest whole number.) product A. You are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options. For the purchase option, the firm can buy product A at $17 per unit. For the make option, the firm can produce product A based on the following cost estimation data. The firm has to pay a weekly rental payment of $14,400 for the production facility. With the use of this facility, the firm also has to hire five operators to help make product A. Each operator works eight hours per day, five days per week at the rate of $12 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $11 per unit of product A. a. Find a weekly amount of product A that provides the breakeven point for the firm. The breakeven point in this problem indicates the firm's indifference between purchasing or making product A. b. If the firm estimates the sale of product A to be 1,000 units per week, should it make or purchase product A? a. A weekly amount of product A that provides the breakeven point for the firm is b. If the firm makes 1,000 units per week, the total cost will be $. (Round to the nearest dollar.) If the firm purchases 1,000 units per week, the total cost will be $. (Round to the nearest dollar.) The firm should units per week. (Round to the nearest whole number.) product A.
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a To find the weekly breakeven point for the firm we need to equate the total cost of making the pro... View the full answer
Related Book For
Cornerstones of Cost Management
ISBN: 978-1285751788
3rd edition
Authors: Don R. Hansen, Maryanne M. Mowen
Posted Date:
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