The manager of a local pub is considering adding a healthier option to the menu in the form of a veggie plate with hummus. There are two options with the price to the customers the same. The make in-house option is to buy local produce from a local farmer’s market and have the staff assemble the veggie plates. This would require some special prep space, equipment, etc. and a part-time prep cook would need to be hired. The pub manager estimates the fixed costs of this option at $12,000 and variable costs at $1.50 per veggie plate. The buy (or outsource) option is to contract with a local supplier and get preassembled veggie plates for $2 per plate. This however, would require a new refrigerator to hold the preassembled plates at an annual fixed cost of $2400.
At how many veggie plates sold does it still make sense to install the equipment and make the plates in house?
To get them from a supplier? How many plates must be sold to make the manager indifferent across the make or buy options?