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2. A New York motorcycle manufacturer (Hot Rodz) has the option to make or buy tires.
The annual requirement is 20,000 tires. A supplier is able to supply the tires for $100 each.
Hot Rodz estimates that it costs $6000 to prepare the contract with the supplier. To make the parts in-house, Hot Rodz must invest $50,000 in capital equipment and estimates tht the tires cost $75 each.
a.   Assuming that cost is the only criterion, use break-even analysis to determine whether Hot Rodz should make or buy the item. What is the break-even quantity and what is the total cost at the break-even point?
b. Calculate the total costs for both options at 20,000 units. What is the cost savings for choosing the cheaper option?
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