Exercise 1.

Cost Make

Costs Make Option Buy Option

Fixed $125,000 $5,000
Variable $15 $17

Requirement = 150,000 units

Exercise 2

Cost Make

Costs Make Option Buy Option

Fixed $25,000 $3,000
Variable $8 $12

a. Break Even point and Total Cost

b. Decision at 4,500 units
c. Decision at 6,000 units
Exercise 3.

Cost Make

Costs Make Option Buy Option

Fixed $50,000 $1,000
Variable $25 $X

If Break Even Point is at 20,000 units find X the variable cost.

Exercise 4.

Cost Make

Costs Make Option Buy Option

Fixed $50,000 $600
Variable $8 $10

a. Please find the Break Even Point.

b. If requirement is 20,000 units, should the company buy or make.

Find the BE quantity Q