Question

harbortown marine products, harbortown management is concerned about future changes in material prices arising from volatility in the commodities market. required: at what unit costs for materials would hmp be just indifferent between making and buying the 3,000 units of the fitting if all other costs remain as predicted? enter your answer in 2 decimal palces.

Answer 1

To determine the unit costs for materials at which HMP would be just indifferent between making and buying the fittings, set the total cost of making equal to the total cost of buying and solve for the unit costs.

Step-by-step explanation:

In order to determine the unit costs for materials at which Harbortown Marine Products (HMP) would be just indifferent between making and buying the 3,000 units of the fitting, we need to consider the costs associated with each option.

If HMP decides to make the fittings, they would incur costs such as raw materials, labor, and overhead costs. Let's represent the total cost of making the fittings as MCM.

If HMP decides to buy the fittings, they would need to consider the purchase price per unit. Let's represent the total cost of buying the fittings as MCB.

At the point of indifference, both options would cost the same. Therefore, we can set MCM = MCB and solve for the unit costs for materials.

For example:

If the unit cost for materials is $50 (MCM = 50), and the purchase price per unit is $70 (MCB = 70), HMP would be indifferent between making and buying the fittings.