The Albany Engineering Co Ltd has the option to make or buy

The Albany Engineering Co Ltd has the option to make or buy one of its component parts. The annual requirement is 8,500 units. A supplier is able to supply the parts for $13 per piece. The firm estimates that it costs $3,700 to prepare the contract with the supplier. To make the part in-house, the firm must invest $23,500 in capital equipment and estimates that the parts cost $10 per piece. Complete the table below.
Important! Enter all responses as whole numbers with a comma as needed (#,###).

Should the firm make or buy? (Enter Make or Buy)

What is the break-even quantity? (Enter as ##,### or #,###)

What is the total cost at the break-even point? (Enter as ###,### or ##,###)

$

Assume instead that the annual requirement is 5,500; calculate the total cost for both options and the cost savings for choosing the cheaper option.

Total cost for making at 5,500 units: (Enter as ###,### or ##,###)

$

Total cost for buying at 5,500 units: (Enter as ###,### or ##,###)

$

Cost savings from choosing the cheaper option: (Enter as ##,### or #,###)

$

Solution

SOLUTION:- costs if firm make the product

capital equipment=23500

cost per units =10=8500*10=85000

total costs =108500

costs if firm buy the product:-

8500*13=110500

it is recommended to make the product because it gives the benefit of 2000 over the proposal of buying.

break even quantity:-

fixed cost/ contribution per unit

=23500/13-10

7833 units

total cost at break even point = fixed costs = 23500

variable costs =7833*10= 78330

total costs at break even point =101830