A firm”s manager must decide whether to make or buy a certain item used in the production of vending machines

| April 14, 2018

A firm”s manager must decide whether to make or buy a certain item used in the production of vending machines. Making the item would involve annual lease costs of $150,000. Cost and volume estimates are as follows:MakeBuyAnnual fixed cost$150,000NoneVariable cost/unit$60$80Annual volume (units)12,00012,000a. Given these numbers, should the firm buy or make this item?b. There is a possibility that volume could change in the future. At what volume would the manager be indifferent between making and buying?

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