Question 3 3 pts The Green Machine Manufacturing Company has the option to make

Question

Question 3 3 pts The Green Machine Manufacturing Company has the option to make or buy a component part for one of its lawnmowers. The annual requirement is 25,000 units. A supplier is able to supply the parts for $12.25 per piece. Green Machine estimates that it will cost $700 to prepare the contract with the supplier. To make the parts in-house, Green Machine must invest S100,000 in capital equipment. They estimate it will cost $9.00 per piece to produce the part in-house. Carry all calculations out to two decimal places. If the demand is 25,000 units, should Green Machine make or buy the part? Buy the part O Make the part O Both O Neither O Not enough information

Explanation / Answer

total cost of order for inhouse manufacturing

= 100000 + 25000 *9

= 325000

total cost of order supplied

= 25000 * 12.25 + 700

= 306950

hence buy the part

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