Bounce Company has collected the following information:
What level of production is needed for Bounce to be indifferent between making or buying the part, assuming it can eliminate $75,000 of fixed costs?

Question

Bounce Company has collected the following information:
 What level of production is needed for Bounce to be indifferent between making or buying the part, assuming it can eliminate $75,000 of fixed costs?

Quizplus · Accepted Answer

The point of indifference is the point where the cost to make and the cost to buy are equal. With total variable cost per unit of $19, the point at which the relevant cost to make equals $24 per unit is where relevant fixed cost per unit is $5, which is $75,000 / $5, or 15,000 units. Let Q = Quantity. The cost to make of $19Q + $75,000 = $24Q the cost to buy; 5Q = $75,000; Q = 15,000 units

Bounce Company Has Collected the Following Information