Problem:
A firm is evaluating the alternative of manufacturing a part that is currently being outsourced from a supplier. The relevant information is as follow:
For in-house manufacturing:
Annual fixed cost= $100,000
Varable cost per part= $140
For purchsing from supplier:
purchase price per part= $160
Required:
Question 1) Using this information, determine the break-even quantity for which the firm would be indifferent between manufacturing the part in-house or outsourcing it. Solve the problem and show all work.