A Las Vegas, Nevada, manufacturer has the option to make or buy one of its components parts. The annual requirement is 10,000 units. To make the parts in-house,the firm must invest $30,000 in capital equipment and estimates that the parts cost $6 each. The firm estimates that it costs $1,000 to prepare the contract with supplier.
Assume that a supplier is able to supply the parts for $10 each
A) What is the break-even quantity?
B) What is the total cost at break-even point?
Assume that the firm can negotiate a contract to buy 10,000 units of its components parts from a supplier
C) what is the maximum purchase price (i.e unit price) that the firm should negotiate with the supplier?