A Manufacturer Has a Choice of Purchasing and Installing a Heat-

Essay

A manufacturer has a choice of purchasing and installing a heat- treating oven or having the heat treating done by an outside supplier. For the in- house treatment the fixed costs are $28,000 with a variable cost of $10. To purchase outside, the variable costs are $17 per unit.
What is the cost equalization point. Should the company have the heat treating done outside if the annual volume is 3,000 units? 5,000 units?