Suppose a manufacturer has identified the following options for obtaining a machined part; It can buy the part at $200 per unit (including materials); it can make the part on a numerically controlled semiautomatic lathe at $75 per unit (including materials); or it can make the part on a machining center at $15 per unit (including materials), there is negligible fixed cost if the item is purchased; a semiautomatic lathe costs $80,000; and a machining center costs $200,000. (assume that we sell the part at $300/unit.)
1. Find break-even points of the three options. Show all your work.
2. If demand is expected to be less than 640 units , what option is the best choice? Explain why.
3. If demand is expected to be more than 640 and less than 2,000, what option is the best choice? Explain why.
4. If demand is expected to be more than 2,000 units, what option is the best choice? Explain why?