Make or Buy A sudden increase in the demand for smoke detectorshas left Acme Alarms with insufficient capacity to meet demand. Thecompany has seen monthly demand from its retailers for itselectronic and battery-operated detectors rise to 20,000 and10,000, respectively, and Acme wishes to continue meeting demand.Acme’s production process involves three departments: Fabrication,Assembly, and Shipping.
The relevant quantitative data on production and prices aresummarized below:
Department
Monthly hours available
Hours/unit (electronic)
Hours/unit (battery)
Fabrication
2000
0.15
0.10
Assembly
4200
0.20
0.20
Shipping
2500
0.10
0.15
Variable cost/unit
$18.80
$16.00
Retail price
$29.50
$28.00
The company also has the option ofobtaining additional units from a subcontractor,