You are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options. For the purchase option, the firm can buy product A at $17 per unit. For the make option, the firm can produce product A based on the following cost estimation data. The firm has to pay a weekly rental payment of $9,200 for the production facility. With the use of this facility, the firm also has to hire five operators to help make product A. Each operator works eight hours per day, five days per week at the rate of $8 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $13 per unit of product A. a. Find a weekly amount of product A that provides the breakeven point for the firm. The breakeven point in this problem indicates the firm's indifference between purchasing or making product A. b. If the firm estimates the sale of product A to be 1,700 units per week, should it make or purchase product A? a. A weekly amount of product A that provides the breakeven point for the firm is 2700 units per week. (Round to the nearest whole number.) b. If the firm makes 1,700 units per week, the total cost will be $. (Round to the nearest dollar.)

You are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options. For the purchase option, the firm can buy product A at $17 per unit. For the make option, the firm can produce product A based on the following cost estimation data. The firm has to pay a weekly rental payment of $9,200 for the production facility. With the use of this facility, the firm also has to hire five operators to help make product A. Each operator works eight hours per day, five days per week at the rate of $8 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $13 per unit of product A. a. Find a weekly amount of product A that provides the breakeven point for the firm. The breakeven point in this problem indicates the firm's indifference between purchasing or making product A. b. If the firm estimates the sale of product A to be 1,700 units per week, should it make or purchase product A? a. A weekly amount of product A that provides the breakeven point for the firm is 2700 units per week. (Round to the nearest whole number.) b. If the firm makes 1,700 units per week, the total cost will be $. (Round to the nearest dollar.)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 5E

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You are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options. For the purchase option, the firm can buy product A at $20 per unit. For the make option, the firm can produce product A based on the following cost estimation data. The firm has to pay a weekly rental payment of $20,000 for the production facility. With the use of this facility, the firm also has to hire five operators to help make product A. Each operator works eight hours per day, five days per week at the rate of $10 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $15 per unit of product A. Solve, a. Find a weekly amount of product A that provides the breakeven point for the firm. The breakeven point in this problem indicates the firm’s indifference between purchasing or making product A. b. If the firm estimates the sale of product A to be 3,500 units per week, should it make or purchase…
You are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options. For the purchase option, the firm can buy product A at $24 per unit. For the make option, the firm can produce product A based on the following cost estimation data. The firm has to pay a weekly rental payment of $30,800 for the production facility. With the use of this facility, the firm also has to hire five operators to help make product A. Each operator works eight hours per day, five days per week at the rate of $14 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $17 per unit of product A. a. Find a weekly amount of product A that provides the breakeven point for the firm. The breakeven point in this problem indicates the firm's indifference between purchasing or making product A. b. If the firm estimates the sale of product A to be 6,400 units per week, should it make or purchase product…
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