1. Suppose that a manufacturer can produce a part for $8.00 with a fixed cost of$3,000. Alternately, the manufacturer could contract with a supplier in Asia to purchase the part at a cost of $10.00,which includes transportation. a. If the anticipated production volume is 1, 400 units, compute the total cost of manufacturing and the total cost of outsourcing. b. What is the best decision?

1. Suppose that a manufacturer can produce a part for $8.00 with a fixed cost of$3,000. Alternately, the manufacturer could contract with a supplier in Asia to purchase the part at a cost of $10.00,which includes transportation. a. If the anticipated production volume is 1, 400 units, compute the total cost of manufacturing and the total cost of outsourcing. b. What is the best decision?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter9: Applications Of Cost Theory

Section: Chapter Questions

Problem 2.1CE

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Question

1. Suppose that a manufacturer can produce a part for $8.00 with a fixed cost of$3,000.

Alternately, the manufacturer could contract with a supplier in Asia to purchase the part at a cost of $10.00,which includes transportation.

a. If the anticipated production volume is

1, 400 units, compute the total cost of manufacturing and the total cost of outsourcing.

b. What is the best decision?

2. A bank developed a model for predicting the average checking and savings account balance as balanceequals - 16,079+398 x age+1,322 x

years education +0.125 xhousehold wealth.

a. Explain how to interpret the numbers in this model.

b. Suppose that a customer is 25 years old, is a college graduate (so that years education =16),and has a household wealth of $120,000.

What is the predicted bank balance?

A.The number -16,079

The number 398

The number 1,322

The number 0.125

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