A firm is considering whether to continue to buy a particular component or to ma
ID: 397071 • Letter: A
Question
A firm is considering whether to continue to buy a particular component or to make the component themselves. There is no fixed cost associated with buying the component, but each component costs $17 to purchase. If the firm makes the component, it will incur a fixed cost of $5,000, but will be able to produce each component for $10. Which decision below is correct?
Buy if estimated demand is greater than 714.3 units
Make if estimated demand is greater than 714.3 units
Make if estimated demand is less than 714.3 units
Buy if estimated demand is greater than 5,000 units
a.Buy if estimated demand is greater than 714.3 units
b.Make if estimated demand is greater than 714.3 units
c.Make if estimated demand is less than 714.3 units
d.Buy if estimated demand is greater than 5,000 units
Explanation / Answer
B)Make if estimated demand is greater than 714.3 units
Is the correct option in this case if you think this helped do give a thumbs up else share your queries in comment section.
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