Robinson Crusoe was trying to decide if they should continue making candy machines or outsource to a supplier. Their fixed costs to make them in house were $3,750, and the variable costs were $1.35 per unit. One of their suppliers in Mexico made a similar product for $5.75 per unit.
-If Robinson needed 600 units, which option should be preferred?
A)Choose to make in house
B)Order from the supplier in Mexico
C)Either, since both have the same costs.
D)Neither, since both will incur enormous losses to the company's operations.
E)Need additional information to decide

Question

Quizplus · Accepted Answer

The total cost of making 600 units in-house would be $3,750 (fixed costs) + (600 x $1.35) = $4,470. The total cost of ordering from the supplier would be 600 x $5.75 = $3,450. Therefore, ordering from the supplier would be the preferred option.

Robinson Crusoe Was Trying to Decide If They Should Continue