IO 8. A manager is trying to decide whether to purchase a certain part or to have it produced internally. Internal production could use either oftwo processes. One would entail a variable cost of $17 per unit and an annual fixed cost of $200,000; the other would entail a variablecost of $14 per unit and an annual fixed cost of $240,000. Three vendors are willing to provide the part. Vendor A has a price of $20 perunit for any volume up to 30,000 units. Vendor B has a price of $22 per unit for demand of 1,000 units or less, and $18 per unit for largerquantities. Vendor C offers a price of $21 per unit for the first 1,000 units, and $19 per unit for additional units.a. If the manager anticipates an annual volume of 10,000 units, which alternative would be best from a cost standpoint? For 20,000units, which alternative would be best?b. Determine the range for which each alternative is best. Are there any alternatives that are never best? Which?

Total cost is the cost that we get after adding all the fixed and the variable costs. Total cost =…

Answered: a. If the manager anticipates an annual…

Marketing

20th Edition

ISBN:9780357033791

Author:Pride, William M

Publisher:Pride, William M

Chapter19: Pricing Concepts

Section: Chapter Questions

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a. If the manager anticipates an annual volume of 10,000 units, which alternative would be best from a cost standpoint? For 20,000 units, which alternative would be best? b. Determine the range for which each alternative is best. Are there any alternatives that are never best? Which?