10.00 points Problem 10-1 The supply manager at a dishwasher manufacturer is ass

Question

10.00 points Problem 10-1 The supply manager at a dishwasher manufacturer is assessing the company should purchase the pump from a supplier or assemble the pump in-house. Forecasts suggest that 13,000 pumps are needed per year. The annual fixed costs to assemble the pumps are $140,000 per year. The variable costs per unit to assemble the pump are $17/unit The pumps can be purchased for $21/unit. a. Compute the total annual cost for insourcing and outsourcing the pumps. Total Cost Inscurce per year per year b. Which option would you prefer? Insource O Outsource

Explanation / Answer

a) Volume of output (Q) = 13000 pumps per year

For insource

For outsource

b) Outsourcing should be preffered as it has a lower total cost than insourcing

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