Soft Key is trying to determine how best to produce its newest product, DVORK

keyboards. The keyboards could be produced in-house using either Process A or Process
B, or purchased from a supplier. Cost data are given below. For what levels of demand
should each process be chosen?

.:.
SOLUTION:

Supplier vs. Process A

$20 x  $8, 000  $10 x

$10 x  $8, 000
x  800
Process A vs. Process B

$8, 000  $10 x  $20, 000  $4 x

$10 x  $12, 000  $4 x
$6 x  $12, 000
x  2, 000

Use the supplier when demand is less than 800 keyboards.

Use process B when demand is over 2,000 keyboards.

Use Process A otherwise.