please answer using excel functions. Suppose that a manufacturer can produce a p

Question

please answer using excel functions.

Suppose that a manufacturer can produce a part for $10 and a fixed cost of $5000. The manufacturer can contract with a supplier in Asia to purchase the part at a cost of $12, which includes transportation. If the anticipated volume is 1200 parts, compute the total cost of in-house manufacturing, as well as the total cost of out-sourcing. Which is the better option? Also, what is the break-even volume? At a production level less than break-even, which is the better choice? Greater than break-even? Let C_I = Total costs of in-house production Let C_o = Total costs of out-sourcing production Let q = Quantity

Explanation / Answer

Since there is not sale price mentioned in the details above. Its difficult to say what the break even volume.

However, if you have that and missed out in showing it here, use the formula below to calculate the same:

5000+10*X== S*X (where S is the sale price you already have and X is the break even volume you need to calculate).

As of now , if I assume 1200 is the breakeven volume as given in the second table below, selling price comes out as 17000/1200 or 14.1667.

In case of, [vol > Break Even] =>

For volume upto 2500, It profitable to manufacture it outside (outsourced facility) as the costs are lesser.

For volume >2500, it is profitable to manufacture it in-house to cover for the fixed cost.

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