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Unformatted text preview: much must demand increase in order for outsourcing to become cheaper? (2 points) Ans: 3000 units (Q* = (FC Make-FC Buy ) / (VC Buy-VC Make ) = ($800,000 - $900,000)/($28 - $32) = 25,000; 25000 – 22000 = 3,000) 3.Boys `R Us sells suits to young men. Management is considering vertical integration. It is determined that the company can produce its own suits for a fixed annual cost of $2,000,000 and a production cost of $100 per suit. The current supplier charges a $2,500,000 fixed annual cost and $120 per suit. Over what ranges of demand is each option best? (2 points) Ans: insourcing is always preferable (Q* = (FC Make-FC Buy ) / (VC Buy-VC Make ) = ($2,000,000 - $2,500,000)/($120 - $100) = - 25,000)...
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This note was uploaded on 10/17/2011 for the course MNGT 368 taught by Professor Curthurds during the Spring '08 term at Nicholls State.
- Spring '08