Use the following to answer the questions below.
You currently purchase a part used in your production process from an outside supplier,and have decided to begin making this part in-house.You have two equipment options for moving production in-house: special-purpose equipment and general-purpose equipment.Cost information for these two options is as follows:

-Refer to the instruction above.What is the break even quantity between the two options?
A)30,000 units per year
B)40,000 units per year
C)50,000 units per year
D)60,000 units per year

Question

Use the following to answer the questions below.
You currently purchase a part used in your production process from an outside supplier,and have decided to begin making this part in-house.You have two equipment options for moving production in-house: special-purpose equipment and general-purpose equipment.Cost information for these two options is as follows:
 
-Refer to the instruction above.What is the break even quantity between the two options?
A)30,000 units per year 
B)40,000 units per year 
C)50,000 units per year 
D)60,000 units per year

Quizplus · Accepted Answer

The break-even quantity is the point at which the total cost of the two options is equal. In this case, the total cost of Option A is $300,000 + $10 per unit, and the total cost of Option B is $400,000 + $5 per unit. The break-even quantity is therefore the point at which the total cost of the two options is equal, which is 30,000 units per year.

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