Use the following scenario to answer the questions below.
A company must decide if it will make or buy an item it needs.The company can make the item for $10 / unit,but must spend $15,000 per year in tooling to do so.An outside firm has quoted a total price of $12 / unit to supply the quantity required.
-Refer to the instruction above.What is the break-even point in this situation?

Question

Quizplus · Accepted Answer

To find the break-even point, we need to set the cost of making and buying equal to each other and solve for the number of units.

Cost of making = $10/unit + ($15,000 / number of units)
Cost of buying = $12/unit

Setting these two expressions equal to each other, we get:
$10/unit + ($15,000 / number of units) = $12/unit

Solving for the number of units, we get:
($15,000 / number of units) = $2/unit
Number of units = $15,000 / $2/unit = 7,500 units

Therefore, the break-even point is at 7,500 units. Since the company needs the quantity required, it is best to buy the item from the outside firm rather than make it in-house.

Use the Following Scenario to Answer the Questions Below