irm”s manager must decide whether to make or buy a certain item used in the production of vending machines. Making the item would involve annual lease costs of $150,000. Cost and volume estimates are as follows:
|
Make |
Buy |
|
|
Annual fixed cost |
$150,000 |
None |
|
Variable cost/unit |
$60 |
$80 |
|
Annual volume (units) |
12,000 |
12,000 |
a. Given these numbers, should the firm buy or make this item?
b. There is a possibility that volume could change in the future. At what volume would the manager be indifferent between making and buying?
Categories: