i have a PRINCIPLES OF OPERATIONS MANAGEMENT class and this

i have a PRINCIPLES OF OPERATIONS MANAGEMENT class and this is one questions, so that you have an idea about the questions and all these stuff, so i wish someone can help with it

Problems 1. Gabriela Manufacturing must decide whether to insource or outsource a new toxic-free miracle carpet cleaner that works r with its Miracle Carpet Cleaning Machine. If it decides top insource the product, the process would incur $300,000 of annual a fixed costs and $1.50 per unit of variable costs. If it is outsourced, a supplier has offered to make it for an annual fixed cost of nual fixed cost of (a) Given these two alternatives, determine the indifference (b) If the expected demand for the new miracle cleaner is $120,000 and a variable cost of $2.25 per unit in variable costs. point (where total costs are equal) 300,000 units, what would you recommend that Gabriela Manufacturing do? focturing was able to find a new supplier

Solution

Ans:

1)

Total costs are equal at = $750,000

2)

In source: $300,000 fixed cost + $1.5(300,000) = $750,000
out source: $120,000 fixed cost + $2.25(120,000) = $795,000

The cheaper alternative is in source
The actual difference is $45,000