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# Evaluating Alternatives Problem

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7 years ago
 Evaluating Alternatives Problem A manager is trying to decide whether to purchase a certain part or to have it produced internally. Internal production could use either of two processes. One would entail a variable cost of $17 per unit and an annual fixed cost of$200,000; the other would entail a variable cost of $14 per unit and an annual fixed cost of$240,000. Three vendors are willing to provide the part. Vendor A has a  price of $20 per unit for any volume up to its maximum capacity of 30,000 units. Vendor B has a price of$22 per unit for demand less than 1,000 units, and $18 per unit for larger quantities. Vendor C offers a price of$21 per unit for the first 1,000 units, and $19 per unit for additional units.a.If the manager anticipates an annual volume of 10,000 units, which alternative would be best from a cost standpoint? For 20,000 units, which alternative would be best? (Omit the "$" sign in your response.)TC for 10,000 unitsInt. 1: $__________Int. 2:$ __________Vend A: $__________Vend B:$ ___________Vend C: $___________TC for 20,000 unitsInt. 1:$ __________Int. 2: $__________Vend A:$ __________Vend B: $___________Vend C:$ Read 815 times 1 Reply

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wrote...
7 years ago
 Find out out your cost for both options and decide 1. let your requirement is 30000 units. Variable cost 30000 x 17 = 510,000 Add fixed cost 510,000 + 200,000 = 710,000 Unit cost 710000/30000 = $23.66 2 Variable cost 30000x14 = 420,000 Add fixed cost 420,000 + 240,000 = 660,000 unit cost 660,000/30000 =$22 It is better to give to outsiders depending on the requirement A or B or C is to be selected.
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