Under consideration is a manual process, computerized process, and a collaborative venture with a third party (outsourcing the metal fabrication process). The manual process has fixed costs of $75,100 per month and variable costs of $47 per unit. The computerization process has fixed costs of $125,350 per month and variable costs of $35 per unit. By outsourcing part of the process, the internal fixed costs would be reduced and projected to be $95,500 per month and have variable costs of $38 per unit. Selling price for the bearing is $147.50
a. At what output should the company continue to manufacture the bearings manually?
b. At what output does the computerized process become less expensive than considering outsourcing?
c. At what output does the collaborative venture make sense in terms of outsourcing part of the process?
d. If the forecasted demand level for the bearings was at 2800 per month, which option should be considered and what would the total cost be (based on fixed & variable cost)?