The operations manager at Sebago Manufacturing is considering three proposals for supplying a critical component for its new line of electric watercraft. Proposal one is to purchase the component, proposal two is make the component in-house using rebuilt equipment, and proposal three is to purchase new, highly automated equipment. The costs associated with each proposal are provided in the table below. Proposal Annual cost ofcapital required Variable cost ofeach component One: purchase $0.00 $22.00 Two: make with rebuiltequipment $150,000.00 $14.00 Three: make with newequipment $450,000.00 $12.50 At what quantity range will each option be preferred?
The operations manager at Sebago Manufacturing is considering three proposals for supplying a critical component for its new line of electric watercraft. Proposal one is to purchase the component, proposal two is make the component in-house using rebuilt equipment, and proposal three is to purchase new, highly automated equipment. The costs associated with each proposal are provided in the table below. Proposal Annual cost ofcapital required Variable cost ofeach component One: purchase $0.00 $22.00 Two: make with rebuiltequipment $150,000.00 $14.00 Three: make with newequipment $450,000.00 $12.50 At what quantity range will each option be preferred?
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter26: Capital Budgeting (capbud)
Section: Chapter Questions
Problem 5R
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The operations manager at Sebago Manufacturing is considering three proposals for supplying a critical component for its new line of electric watercraft. Proposal one is to purchase the component, proposal two is make the component in-house using rebuilt equipment, and proposal three is to purchase new, highly automated equipment. The costs associated with each proposal are provided in the table below.
| Proposal | Annual cost of capital required |
Variable cost of each component |
| One: purchase | $0.00 | $22.00 |
| Two: make with rebuilt equipment |
$150,000.00 | $14.00 |
| Three: make with new equipment |
$450,000.00 | $12.50 |
At what quantity range will each option be preferred?
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