Jason company considers beginning the production of an appliance. Operations management department should decide whether to make the small engine for this product in the manufacturing plant, or buy it from an outside supplier.
If management decides to produce the engine, then there are 2 alternatives:
Option 1: Manufacture it by simple machines
Fixed Cost: $16,000/year
Variable Cost: $7 per unit
option 2: Manufacture it by advanced machines
Fixed Cost: $30,000/year
Variable Cost: $5 per unit
The purchase price of the engine from an outside supplier is $9 per unit.
a) What should be the production volume to for Jason to choose to manufacture the engine by simple machines?
b) What should be the production volume to for Jason to choose to manufacture the engine by advanced machines?
c) What should be the production volume to for Jason to purchase the engine from an outside supplier?