A firm plans to begin production of a new small appliance. The manager must deci

Question

A firm plans to begin production of a new small appliance. The manager must decide whether to purchase the motors for the appliance from a vendor at $7 each or to produce them in-house. Either of two processes could be used for in-house production; one would have an annual fixed cost of $168,298 and a variable cost of $5 per unit, and the other would have an annual fixed cost of $195,667 and a variable cost of $4 per unit. Determine the range of annual volume for which each of the alternatives would be best. (Round your answer to the nearest whole number.) For annual volume less than _____?____, _____?____ (Answer for second blank can be these three options: Purchase from vendor, Production in the house at $4 a unit, Production in the house at $5 a unit) is best. For larger quantities, best to produce in house at $_______?_____ per unit.

Explanation / Answer

1st option n*7 > 168,298 + n*5 n > 84,149 units 2nd option n*7 > 195,667 + n*4 n > 65,222 units 195,667 + n*4 < 168,298 + n*5 n > 27,369

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