Scenario 12.1 You Currently Make a Part on Old Equipment at a at a Cost

Multiple Choice

Scenario 12.1
You currently make a part on old equipment at a cost of $50,000 per year and a variable cost of $20 / unit. You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year. The following table summarizes the details of this make versus buy decision.

-Use Scenario 12.1 to answer the question. For what range of output would you prefer to buy?

A) 0 - 10,000 units per year
B) 30,001 or more units per year
C) 10,001 - 20,000 units per year
D) 20,001 - 30,000 units per year