Homework Questions Math/Business?

Insourcing incurs an annual fixed cost of 30,000 and a variable cost of 60 per unit. Outsourcing incurs annual fixed Cost of 50,000 and a variable cost of $20 per unit. Using the make or buy analysis what is the indifference point between the two alternatives? For the scenario anticipated demand is then forecast to be 300 units. Which option, in source or outsource would be most appropriate ?

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  • 3 weeks ago

    what is the indifference point between the two alternatives?

    Make ≤ Buy

    30000 + 60x ≤ 50000 + 20x

    Subtract 20x from both sides

    30000 + 40x ≤ 50000

    Subtract 30000 from both sides

    40x ≤ 20000

    Divide both sides by 40

    x ≤ 500  

    500 <––––––

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    make will be cheaper than buy for anything less than 500

    300 units should be in sourced <–––––

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