Insourcing incurs an annual fixed cost of $500,000 and a variable cost of $60 per unit. Outsourcing incurs an annual fixed cost of $750,000 and a variable cost of $20 per unit. What is the indifference point between the two alternatives?
A) 0 units
B) -6250 units
C) 6250 units
D) 40 units
E) 12,500 units

Question

Quizplus · Accepted Answer

(FC_BUY + (VC_BUY*Q) = FC _Make + (VC _Make*Q) $750,000 + ($20Q) = $500,000 + ($60Q) = 6,250)

Insourcing Incurs an Annual Fixed Cost of $500,000 and a Variable