Let's pretend you are a junior buyer.
Suppose that a make-buy decision is being made for an injection molded plastic part. In other words, do you make it yourself or do you outsource it to a supplier? The fixed costs of making this part are $200,000. The variable cost to make this part is $0.40. The lowest bid received from the pool of qualified suppliers is $0.75 per part. What is the break-even quantity? Hint: It is the point where the total cost to manufacture equals the total cost to purchase. The information below might also help. Please interpret your results. Meaning, what decision should you make based on if you need more or less than the break even quantity?