# 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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### 1 Answer

- MichaelLv 73 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 <–––––