Scenario 2.6 You Currently Purchase a Part Used in Your Production Process

Multiple Choice

Scenario 2.6
You currently purchase a part used in your production process from an outside supplier, and have decided to begin making this part in-house. You have two equipment options for moving production in-house: special-purpose equipment and general-purpose equipment. Cost information for these two options is as follows:

-Use Scenario 2.6 to solve this mystery. At an annual requirement of 40,000 units, what does the company save per year by selecting the lower-cost option?

A) $150,000
B) $300,000
C) $50,000
D) $40,000