Question 4 3 pts The Green Machine Manufacturing Company has the option to make

Question

Question 4 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. What is the cost savings from making the correct decision? Less than or equal to $20,000 O Greater than $20,000 but less than or equal to $25,000 O Greater than $25,000 but less than or equal to $30,000 O Greater than $30,000 but less than or equal to $35,000 Greater than $35,000

Explanation / Answer

total cost of order for inhouse manufacturing

= 100000 + 25000 *9

= 325000

total cost of order supplied

= 25000 * 12.25 + 700

= 306950

cost savings = 325000 - 306950 = 18050

hence choose less than or equal to 20000

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