A Firm Currently Makes a Component, and Requires 30 000

A firm currently makes a component, and requires 30 000 for the coming year's production. Another supplier has offered the part at a delivered price of $3 per unit. It would cost $3000 to check purchased units for quality. Product costs per unit for the past year were $2.35 variable and $1 fixed based on 30 000 units. If the component was bought, fixed overhead would be reduced by $6000, the cost of leasing specialised equipment. The space vacated by the equipment can be rented for $4000 for the year. At what level of units of production is the firm indifferent between making and buying?

A) 30 000 units
B) 10 769 units
C) 4615 units
D) 20 000 units

Correct Answer:

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