Question

Given the following make-buy information, what would be the break-even point?Make Option Buy OptionFixed Costs $15000$1250Variable Costs $ 5$ 10a. 917 unitsb. 2875 unitsc. 1083 unitsd. 2750 units

Answer 1

d. 2750 units

Step-by-step explanation:

The break-even point occurs when the make option cost equals the buy option cost. The number of units 'x' needed in order for both options to yield the same costs is given by:

`\$15,000+x*\$5=\$1,250+x*\$10\\\\x=(\$15,000-\$1,250)/(\$10-\$5)\\\\x=2,750\ units`

The break-even point is 2,750 units