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[answered] ABC manufacturing company has a choice of manufacturing a p


ABC manufacturing company has a choice of manufacturing a part internally or purchasing it from an outside supplier. the variable cost per unit is the same in either case. however it the part is made internally, there is a setup cost of $100. If the part is purchased, there is a fixed cost order of 20$. If the part is made internally, there is zero lead time; if purchased from outside, the lead time is 25 days. (usage during lead time is normally distributed with a mean of 100 units and a standard deviation of 20 units). the cost of carrying one unit inventory is $2 per year. The cost of being one unit short is $18. Annual requirements for this part are 1000 units. Should it be made or purchased?

 


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