A U.S. motorcycle manufacturer has the option of either making the gas tank in their newly designed cycle, or subcontracting it out to a Singapore manufacturer. Costs for the two options are:
$\begin{array}{lcc}
\underline{\text { Source } }& \underline{\text { Fixed Cost}}& \underline{\text { Variable Cost }}\
\text { Make in-house } & \$ 15,000 & \$ 21.50 \
\text { Buy from Singapore } & \$ 0 & \$ 29.00
\end{array}$

a. Which option would be preferred at an annual volume of 1, 000 gas tanks?
b. Which option would be preferred at an annual volume of 5,000 gas tanks?
c. For what range of production volume would it be better to make the gas tanks in?house?

Question

A U.S. motorcycle manufacturer has the option of either making the gas tank in their newly designed cycle, or subcontracting it out to a Singapore manufacturer. Costs for the two options are:
 $\begin{array}{lcc}
 \underline{\text { Source } }& \underline{\text { Fixed Cost}}& \underline{\text {  Variable Cost }}\
\text { Make in-house } & \$ 15,000 & \$ 21.50 \
\text { Buy from Singapore } & \$ 0 & \$ 29.00
\end{array}$
 
a. Which option would be preferred at an annual volume of 1, 000 gas tanks?
b. Which option would be preferred at an annual volume of 5,000 gas tanks?
c. For what range of production volume would it be better to make the gas tanks in?house?

Quizplus · Accepted Answer

The Answer of A U.S. motorcycle manufacturer has the option of either making the gas tank in their newly designed cycle, or subcontracting it out to a Singapore manufacturer. Costs for the two options are:
 $\begin{array}{lcc}
 \underline{\text { Source } }& \underline{\text { Fixed Cost}}& \underline{\text {  Variable Cost }}\
\text { Make in-house } & \$ 15,000 & \$ 21.50 \
\text { Buy from Singapore } & \$ 0 & \$ 29.00
\end{array}$
 
a. Which option would be preferred at an annual volume of 1, 000 gas tanks?
b. Which option would be preferred at an annual volume of 5,000 gas tanks?
c. For what range of production volume would it be better to make the gas tanks in?house?

A US Motorcycle Manufacturer Has the Option of Either Making the the Gas