Use the following information to answer the questions below.
You currently make a part for old equipment at a cost of $20 / unit. The annual fixed cost for this equipment is $50,000. You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year (see table).

-Refer to the instruction above. What is the break even quantity between buying and making?
A) 30,000 units per year
B) 40,000 units per year
C) 50,000 units per year
D) 60,000 units per year

Question

Use the following information to answer the questions below.
You currently make a part for old equipment at a cost of $20 / unit. The annual fixed cost for this equipment is $50,000. You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year (see table).
 
-Refer to the instruction above. What is the break even quantity between buying and making?
A) 30,000 units per year 
B) 40,000 units per year 
C) 50,000 units per year 
D) 60,000 units per year

Quizplus · Accepted Answer

The break-even quantity is where the cost of buying and making are equal. In this case, the cost of buying is $10 per unit and the cost of making is $15 per unit. So, the break-even quantity is where 10x = 15x, or x = 30,000 units per year.

Use the Following Information to Answer the Questions Below