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Hoboken Industries currently manufactures 39,000 units of part MR24 each month for use in production of several of its products.

Hoboken Industries currently manufactures 39,000 units of part MR24 each month for use in production of several of its products. The facilities now used to produce part MR24 have a fixed monthly cost of $195,000 and a capacity to produce 88,500 units per month. If the company were to buy part JR63 from an outside supplier, the facilities would be idle, but its fixed costs would continue at 40 percent of their present amount. The variable production costs of part MR24 are $14 per unit.


If Hoboken Industries continues to use 39,000 units of part MR24 each month, it would realize a net benefit by purchasing part MR24 from an outside supplier only if the supplier's unit price is less than what amount?


If Hoboken Industries is able to obtain part MR24 from an outside supplier at a unit purchase price of $16, what is the monthly usage at which it will be indifferent between purchasing and making part MR24 ?

Top Answer

Less than $17. 58500 units... View the full answer

2 comments
  • Thank you. I could never figure out what the "x" was when I was trying to do it myself. Your explanation helps me understand it.
    • mommy23spoiled
    • Apr 05, 2018 at 2:07pm
  • You're welcome.
    • dinamarcanete
    • Apr 05, 2018 at 4:48pm

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