Answer:
1. Greater than 30,000 but less than or equal to 35,000
2. Greater than $370,000 but less than or equal to $375,000
3. A) Buy the part.
4. A) Less than or equal to $20,000.
Explanation:
Total cost = Fixed cost + (Variable costper unit * Volume
Let the volume be x
TC buy = 700 + 12.25x
TC make = 100,000 + 9.00x
TC buy = TC make
700 + 12.25x = 100,000 + 9.00x
12.25x - 9.00x = 100,000 - 700
3.25x = 99,300
x = 99,300 / 3.25
x = 30553.847
x = 30,554 units
The correct answer is "Greater than 30,000 but less than or equal to 35,000"
2. TC buy = 700 + 12.25x
TC buy = 700 + (12.25 * 30,554)
TC buy = $700 + $374,287
TC buy = $374,987
TC make = 100,000 + 9.00x
TC make = 100,000 + (9.00 * 30,554)
TC make = $100,000 + $274,986
TC make = $374,986.
The correct answer is "Greater than $370,000 but less than or equal to $375,000"
3. TC buy = 700 + 12.25x
TC buy = 700 + (12.25 * 25,000)
TC buy = $700 + $306,250
TC buy = $306,950
TC make = 100,000 + 9.00x
TC make = 100,000 + (9.00 * 25,000)
TC make = $100,000 + $225,000
TC make = $325,000.
Calculating cost in both the cases, we see that in 1st case it is $306950, which is less than making in-house. Thus, Option A, Buy the Part
4) Cost Savings = $100,000 + (9.00 * 25,000) - $700 - (12.25 * 25,000)
Cost Savings = $325,000 - $306,950
Cost Savings = $18,050
Thus, Option A since it less than or equal to $20000
