The operations manager at Sebago Manufacturing is considering three proposals for supplying a critical component for its new line of electric watercraft. Proposal one is to purchase the component, proposal two is make the component in-house using rebuilt equipment, and proposal three is to purchase new, highly automated equipment. The costs associated with each proposal are provided in the table below.

At what quantity range will each option be preferred?

Transcribed Image Text:

Annual cost of capital required Proposal One: purchase Two: make with rebuilt Variable cost of each component $22.00 $14.00 $0.00 $150,000.00 equipment Three: make with new$450,000.00 equipment $12.50