Business, 23.09.2021 04:20 mzink23

Hahn Manufacturing has been purchasing a key component of one of its products from a local supplier.. The current purchase price is $1,500 per unit. Efforts to standardize parts suc-ceeded to the point that this same component can now be used in five different products. Annual component usage should increase from 150 to 750 units. Management won-ders whether it is time to make the component in-house rather than to continue buying it from the supplier. Fixed costs would increase by about $40,000 per year for the new equipment and tooling needed. The cost of raw mate-rials and variable overhead would be about $1,100 per unit, and labor costs would be $300 per unit produced. Required:
a. Should Hahn make rather than buy?
b. What is the break-even quantity?
c. What other considerations might be important?

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Hahn Manufacturing has been purchasing a key component of one of its products from a local supplier....