A Manufacturer Has a Choice of Purchasing and Installing a Drilling

Essay

A manufacturer has a choice of purchasing and installing a drilling machine having the drill work done by an outside supplier. For the in- house drilling the fixed costs are
$100,000 with a variable cost of $12. To purchase outside, the variable costs are $20 per unit.
What is the cost equalization point. Should the company have the heat treating done outside if the annual volume is 1,000 units? 10,000 units?