You are given the following information:
Costs
|
Make Option
|
Buy Option
|
Fixed Cost
|
$125,000
|
$5,000
|
Variable Cost
|
$15
|
$17
|
1. Find the break-even quantity and the total cost at the break-even point.
2. If the requirement is 150,000 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?