The Green Machine Manufacturing Company has the option to make or buy a component part for one of its lawnmowers. The annual requirement is 30,000 units. A supplier is able to supply the parts for $12.00 per piece. Green Machine estimates that it will cost $1,000 to prepare the contract with the supplier. To make the parts in-house, Green Machine must invest $100,000 in capital equipment. They estimate it will cost $8.50 per piece to produce the part in-house.
1. Carry all calculations out to two decimal places.
A. What is the breakeven quantity?
B. What is the total cost at the breakeven point?
C. What is the cost savings from making the correct decision?