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Nye Products is currently insourcing all its

telephone answering machines​ (its only​ product), with a yearly fixed cost of ​$4 comma 500 comma 000


4,500,000 and a variable cost per unit of ​$3.50


3.50. CEO Harvey Nye has published a request for information and found an outsourcing provider that can manufacture the product with equal quality for a yearly​ fixed-cost payment of ​$3 comma 500 comma 000


3,500,000 and a variable cost per unit of ​$9.00


9.00. Nye Products is now facing a yearly demand of 300 comma 000


300,000 telephones.

Screen Shot 2019-08-03 at 1.27.43 PM.png

Screen Shot 2019-08-03 at 1.27.43 PM.png

IDS532 Introduction to Operations Management (1)
Homework: Homework 8
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Nye Products is currently insourcing all its telephone answering machines (its only product), with a yearly fixed cost
of $4,500,000 and a variable cost per unit of $3.50. CEO Harvey Nye has published a request for information and
found an outsourcing provider that can manufacture the product with equal quality for a yearly fixed-cost payment of
$3,500,000 and a variable cost per unit of $9.00. Nye Products is now facing a yearly demand of 300,000
telephones.
a) What is the cross-over point 'q' in units? q = 1 (round your response to the nearest whole number).
b) Using the unit cross-over model, should Nye outsource or continue to insource the manufacture of this product?
Harvey Nye's demand is 300,000.
Since the computed q is greater than
the expected demand of 300,000 units, the decision is
to outsource
since Harvey Nye has variable cost greater than
the alternative.
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