(Answered) Zipco is in serious negotiations to purchase a chunking

Management Studies

Zipco is in serious negotiations to purchase a chunking machine that will enable them to perform their own chunking at $1.25 per unit. They currently have their chunking outsourced at a cost of $1.75 per unit and a fixed cost of $45,000. Their marketing team feels that they can sustain an annual volume of 25,000 units. What is the maximum fixed cost that Zipco should be willing to bear in order to perform their own chunking?

Select one:

a. $52,500

b. $57,500

c. $55,000

d. $50,000

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Operation Management, Management Studies

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