A manager is trying to decide whether to purchase a certain part or to have it produced…

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 $15 per unit and an annual fixed cost of $203,000; the other would entail a variable cost of $12 per unit and an annual fixed cost of $260,000. Three vendors are willing to provide the part. Vendor A has a price of $19 per unit for any annual quantity up to 28,000 units. Vendor B has a price of $21 per unit if demand is 1,000 units or less, but $16 per unit (for all units) if demand is greater. Vendor C offers a price of $20 per unit for the first 1,000 units, and $18 per unit for additional units.

a-1. If the manager anticipates an annual demand of 15,000 units, which alternative would be best from a cost standpoint?

multiple choice 1
Vendor A
Vendor B
Vendor C
Internal 1
Internal 2

a-2. If the manager anticipates an annual demand of 65,000 units, which alternative would be best from a cost standpoint?

multiple choice 2
Vendor A and Internal 1
Vendor B and Internal 1
Vendor C and Internal 1
Vendor C and Internal 2
Vendor B and Internal 2

b-1. Determine the range for which each alternative is best?

Range Optimal Choice
1 to 1000
(Click to select)
1,001 to 65,000
(Click to select)
65,000 or more
(Click to select)

b-2. Are there any alternatives that are never best, If so, which ones?

multiple choice 6
Internal 2 and Vendor B are never best.
Internal 1 and Vendor C are never best.
Internal 1 and Vendor A are never best.