00:01
To determine whether manufacturing or outsourcing is the best option based on anticipated production volume, we need to compare the total cost of each option.
00:08
So, for manufacturing, the unit cost is $100 and the fixed cost is $16 ,000.
00:23
No, $60 ,000.
00:25
And for outsourcing, the unit cost is $300.
00:34
To compare the costs, we can use the following formulas.
00:36
Manufacturing cost is equal to the unit cost times the anticipated production volume plus the fixed cost.
00:42
The outsourcing cost is the unit cost times the anticipated production volume.
00:46
So, let's evaluate each option based on the given options.
00:50
For choice a, if the anticipated production volume is between 201 and 300, outsourcing is always going to be the best option.
01:01
Let's compare.
01:03
So, manufacturing cost would be $100 times 300 plus $60 ,000, which is going to be $30 ,000 plus $60 ,000, so that's $90 ,000.
01:21
And the outsourcing will be 300 times 300, which is $90 ,000.
01:27
In this case, both manufacturing and outsourcing costs are equal at $90 ,000, so outsourcing may be a more favorable option in terms of convenience or other factors.
01:36
So, i wouldn't go with a...