Suppose that a manufacturer can produce a part for S9 with a fixed cost of SA,000. The manufacturer can contract with a supplier in Asia to purchase the part at a cost of S12, which includes transportation.
a) If the anticipated production volume is 1,000 units, compute the total cost of manufacturing and total cost ofoutsourcing. What is the best decision?
b) Find the break-even volume and characterize the range of volumes for which it is more economic to produce or to outsource. A Data Table can be useful for al this analysis (see Appendix A) 1000 Mfg subcontract