Simuelson Industries can produce its own motors for a $60,000 fixed monthly cost and a $50 variable cost per unit. Alternatively, Simuelson Industries can purchase the motors from an outside supplier for $50,000 per month and $58 per unit.
a) What is the indifference point?
b) What option should be chosen if monthly demand is 1200 units?

Question

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The Answer of Simuelson Industries can produce its own motors for a $60,000 fixed monthly cost and a $50 variable cost per unit. Alternatively, Simuelson Industries can purchase the motors from an outside supplier for $50,000 per month and $58 per unit.
a) What is the indifference point?
b) What option should be chosen if monthly demand is 1200 units?

Simuelson Industries Can Produce Its Own Motors for a $60,000