The manager of a bistro is considering outsourcing its regular cake production to MousseCakeFactory. Currently, it costs $10 per cake to produce the cakes in house. MousseCakeFactory charges $6 per cake but requires the manager to display MousseCakeFactory logo on a display that would hold the entire cake collection. To do so, the manager is required to make an upfront lump sum payment daily to MousseCakeFactory for that display. The manager knows that she sells at least 120 slices of cake per day. The manager wants to make the decision to outsource based on the assumption that she would sell at most 120 slices of cake per day. [Assume: Each cake has 8 slices]
a. Given this assumption, what would be the maximum daily lump sum payment that the manager would be willing to pay for that container?
b. If MousseCakeFactory charges $50 for the display, would you (as the manager) agree to outsource? Why or why not?