Question

A company manufacture parts using either domestic contractor (A) or competing oversea contractor (B). Find the break-even quantity of parts

Answer 1

The table is missing in the question. The table is :

Contractor Overhead Cost Shipping Cost Import tax Part cost

Domestic A 350 0.50 0 8.25

Overseas B 200 1.20 12 5.50

The answer is : The two contractors will never achieve even and the overseas contractor will be cheaper than the domestic contractor.

Step-by-step explanation:

Finding the number of the parts the two contractors i.e the domestic A as well as the overseas B will cost the same to the company.

Let us suppose the x number of parts that the two contractors will be breaking even. So we get,

350 + 0.5x + 8.25x = 200 + 1.2x + 0.12x + 5.5x

350 + 8.75x = 200 + 6.82x

8.75x - 6.82x = 200- 350

x = -77.72

Since, we get x as negative, it means that the contractor will never get even. Thus the overseas contractor will always be cheaper.