You run a manufacturing facility that makes roller skates. Fixed monthly cost is $50,000 in mortgage, $3,000 per employee on ave
rage in salaries (you have 40 employees) and $20,000 in other expenses. The cost of raw materials is $2 per skate, and other costs per skate average to about $1. You sell the skates for $19.95 each.
You have the option of outsourcing the manufacturing, which will cost you $10 per skate, with a lower fixed cost of $90,000. At what point will you be indifferent between manufacturing yourself versus outsourcing it?
You have the option of outsourcing the manufacturing, which will cost you $10 per skate, with a lower fixed cost of $90,000. At what point will you be indifferent between manufacturing yourself versus outsourcing it?
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