A global manufacturer of electrical switching equipment (ESE) is considering out

Question

A global manufacturer of electrical switching equipment (ESE) is considering outsourcing the manufacturing of an electrical breaker used in the manufacturing of switch boards. The company estimates that the annual fixed cost of manufacturing the part in-house, which includes equipment, maintenance, and management, amounts to $11 million. The varlable cost of labor and materials are $15.00 per breaker. The company has an offer from a major subcontractor to produce the part for $24.00 per breaker. a. How many breakers would the electrical switching equipment company need per year to make the in-house option the leastcosty? The company should consume breakers per year o make he manufacturing the part in-house option the least costy Enter your response round to the nearest whole number. less than more than

Explanation / Answer

For breakeven point, the total cost should be equal. Let at 'x' units, breakeven is achieved

Total cost for in-house = 11*10^6 + 15*x

Outsourcing = 24*x

So,

11*10^6 + 15*x = 24*x

x = 1,222,222.22

The company should consume more than 1,222,222 units to make manufacturing of in-house least costly

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