Suppose that 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 machine 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. The part is sold at the price of $300 each.
(Show work in Excel)
a. What is the breakeven point for the numerically controlled semi-automatic lathe?
b. What is the breakeven point for the machine center?
Compute the total revenue, total cost, and total profit for each of the 3 options when Q = 500
Over what range of demand level (Q) will the buy option be best; the make on semiautomatic lathe be best; make on machine center be best?