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A furniture manufacturer is assessing whether it should make or buy the wooden frames for upholstered dining room chairs. The forecast is for 100,000 chairs to be produced per year. The fixed costs per year to make the frames are $150,000 and the variable costs are $5 per frame. The supplier's bid is $8 per frame. a. Compute the total annual cost for insourcing and outsourcing the chair frames. b. Which option would you prefer?

A furniture manufacturer is assessing whether it should make or buy the wooden frames for upholstered dining room chairs. The forecast is for 100,000 chairs to be produced per year. The fixed costs per year to make the frames are $150,000 and the variable costs are $5 per frame. The supplier's bid is $8 per frame. a. Compute the total annual cost for insourcing and outsourcing the chair frames. b. Which option would you prefer?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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A furniture manufacturer is assessing whether it should make or buy the wooden frames for upholstered dining room chairs. The forecast is for 100,000 chairs to be produced per year. The fixed costs per year to make the frames are $150,000 and the variable costs are $5 per frame. The supplier's bid is $8 per frame. a. Compute the total annual cost for insourcing and outsourcing the chair frames. b. Which option would you prefer?
Transcribed Image Text:A furniture manufacturer is assessing whether it should make or buy the wooden frames for upholstered dining room chairs. The forecast is for 100,000 chairs to be produced per year. The fixed costs per year to make the frames are $150,000 and the variable costs are $5 per frame. The supplier's bid is $8 per frame. a. Compute the total annual cost for insourcing and outsourcing the chair frames. b. Which option would you prefer?
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