Answered: a. What is the break-even quantity? b.…

Business

Accounting

a. What is the break-even quantity? b. Should the firm make-in-house or outsource?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Break even Analysis.

Q* = ______FC_______

VC2 - VC1

Industrial Products, Inc. has two alternatives for manufacturing 12,000 industrial 100-horse power electric motors per year. If done in-house, fixed cost would be $2,100,000 with variable cost at $6,800 per unit. Alternative two is to outsource for a total cost of $7,300 per unit.

a. What is the break-even quantity?

b. Should the firm make-in-house or outsource?

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