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Coffee Plus is currently insourcing all its coffee makers with a yearly fixed cost of 7 million and a variable cost per unit of 3 dollars. An outsourcing provider has offered to manufacture the coffee makers for a yearly fixed cost payment of 3 million and a variable cost per unit of 8 dollars. Coffee Plus faces a yearly demand of 1.5 million coffee makers.
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- Using the break even model should Coffee Plus outsource or continue to insource the coffee makers?
- What is the break even point in units?
© BrainMass Inc. brainmass.com March 21, 2019, 5:24 pm ad1c9bdddf
https://brainmass.com/business/business-management/insource-outsource-coffee-maker-break-even-model-219428
Solution Preview
Please see my response below.
1.
Let us calculate the break-even point under the two options
7M + …
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