Hahn Manufacturing has been purchasing a key component of one of
its products from a local supplier. The current purchase price is
$1400 per unit. Efforts to standardize parts have succeeded to the
point that this same component can now be used in five different
products. Annual component usage should increase from 150 to 900
units. Management wonders whether it is time to make the component
in-house, rather than to continue buying it from the supplier.
Fixed costs would increase by about $40,000 per year for the new
equipment and tooling needed. The cost of raw materials and
variable overhead would be about $1000 per unit, and labor costs
would go up by another $250 per unit produced.
Should Hahn make rather than buy? the answer is 75000.
What is the break-even quantity? the answer is 400 units
3. What other considerations might be important?
Since Hahn would be ordering 900 units instead of 150,they can count on a discount from the supplier. The discount of at least $.... would make the "buy" decision better than the "make" alternative. (Enter your response rounded to the nearest whole number.)
dont know how to solve part 3. Help thanks!
Should Hahn make rather than buy? the answer is 75000.
What is the break-even quantity? the answer is 400 units
3. What other considerations might be important?
Since Hahn would be ordering 900 units instead of 150,they can count on a discount from the supplier. The discount of at least $.... would make the "buy" decision better than the "make" alternative. (Enter your response rounded to the nearest whole number.)
dont know how to solve part 3. Help thanks!
