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Solved - Example 1 Revisit & Example 2 Recording

The document discusses break-even analysis for a company deciding whether to produce a product internally or outsource production. It provides manufacturing fixed costs of $234,000 and variable costs of $2 per unit for internal production. Outsourcing costs $3.50 per unit. The break-even point is calculated as 156,000 units, which is the quantity where total costs of internal production equals total costs of outsourcing. A chart shows total costs for different production quantities, with costs being equal at 156,000 units.

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Minza
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32 views

Solved - Example 1 Revisit & Example 2 Recording

The document discusses break-even analysis for a company deciding whether to produce a product internally or outsource production. It provides manufacturing fixed costs of $234,000 and variable costs of $2 per unit for internal production. Outsourcing costs $3.50 per unit. The break-even point is calculated as 156,000 units, which is the quantity where total costs of internal production equals total costs of outsourcing. A chart shows total costs for different production quantities, with costs being equal at 156,000 units.

Uploaded by

Minza
Copyright
© © All Rights Reserved
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Break-Even point (Goal Seek)

Don't forget to name the cells!

Nowlin Plastics

Parameters
Manufacturing Fixed Cost $234,000.00
Manufacturing Variable Cost per Unit $2.00

Outsourcing Cost per Unit $3.50

Model
Quantity 156,000 X

Total Cost to Produce $546,000.00 Y1

Total Cost to Outsource $546,000.00 Y2

Savings due to Outsourcing $0.00

Chart Title
$12.00

$10.00

$8.00

$6.00

$4.00

$2.00

$-
0 00 0 00 0 00 0 00 00 00 0 00 00
25 50 75 00 50 50
0
75 00
1 12 1 1 20 2
Production equation QTY 25000 50000
TFC + VC*X = Y1 Savings by O $0.00

Outsourcing Equation
OC * X = Y2

Breakeven point Qty Savings by O


$0.00
TFC + VC*X = OC *X 25000
TFC = OC*X - VC*X 50000
TFC = (OC -VC) *X 75000
TFC /(OC - VC) = X 100000
156000 LHS 125000
150000
175000
200000
225000
250000
275000
300000

Qty Cost to make Cost to O


Chart Title $546,000.00 $546,000.00
$12.00 25000
50000
$10.00 75000
$8.00
100000
125000
$6.00 150000
175000
$4.00
200000
$2.00 225000
250000
$-
00 00 00 00 00 00 00 00 00 00 00 00
275000
0 0 0 0 50 0 0 00 0 0 50 0
25 50 75 1 00 12 1 50 1 75 20 2 25 2 50 27 3 00 300000
75000 100000 125000 150000 175000 200000 225000 250000

$0.00 2.75 3 3.25 3.5 3.75 4


25000
50000
75000
100000
125000
150000
156000
175000
200000
225000
250000
275000
300000
275000 300000
Gambrell Manufacturing
Parameters
Component ID 570 578 741 755
Inventory On-Hand 5 30 70 17
Order Up to Point 100 55 70 45
Cost per unit $4.50 $12.50 $3.26 $4.15

Fixed Cost per Order $120

Minimum Order Size for Discount 50


Discounted to 100%

Model

Component ID 570 578 741 755


Order Quantity 95 25 0 28
Cost of Goods $427.50 $312.50 $0.00 $116.20

Total Number of Orders 3

Total Fixed Costs $360.00


Total Cost of Goods $856.20
Total Cost $1,216.20

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