Use the following scenario to answer the questions below.
A company is considering making versus buying a part needed for manufacturing.Particulars are as follows:

-Refer to the instruction above.What is the annual break-even quantity for choosing between making and buying in this situation?

Question

Use the following scenario to answer the questions below.
A company is considering making versus buying a part needed for manufacturing.Particulars are as follows:
 
-Refer to the instruction above.What is the annual break-even quantity for choosing between making and buying in this situation?

Quizplus · Accepted Answer

The annual break-even quantity is the point where the cost of making equals the cost of buying. In this scenario, the fixed costs of making are $20,000 and the variable cost per unit is $5. The cost of buying is $9 per unit. Using the formula:

Annual Break-Even Quantity = Fixed Costs / (Cost to Make per Unit - Cost to Buy per Unit)

We can calculate:

Annual Break-Even Quantity = $20,000 / ($5 - $9) = 2,000 units

Therefore, the company should choose to make the part if they expect to produce more than 2,000 units in a year, and buy the part if they expect to produce fewer than 2,000 units in a year.

Use the Following Scenario to Answer the Questions Below