You are given the following information: costsmake optionbuy optionfixed cost$25,000$3,000variable cost$8$12a. find the break-even quantity and the total cost at the break-even point. b.if the requirement is 4,500 units, is it more cost-effective for the firm to buy or make the components? what is the cost savings for choosing the cheaper option? c. if the requirement is 6,000 units, is it more cost-effective for the firm to buy or make the components? what is the cost savings for choosing the cheaper option?

Instructions are listed below.

Explanation:

Giving the following information:

Make in house

Fixed Cost= $25,000

Variable Cost= $8

Outsource

FIxed cost= $3,000

Variable cost= $12

a. Find the break-even quantity and the total cost at the break-even point.

in house cost= 25000+8*q

Outsource= 3000+12*q

25000+8*q=3000+12*q

22000=4q

5500=q

In house= 25000+8*5500= $69000

Oursource= 3000+12*5500= $69000

b. Q=4500

In house= 25000+8*4500= $61000

Oursource= 3000+12*4500= $57000

At this given quantity, it is cheaper to outsource. Costs saving sum up to $4000

c. q=6000

In house= 25000+8*6000= $73000

Oursource= 3000+12*6000= $75000

At this given quantity, it is cheaper to make in-house. Costs saving sum up to $2000

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