1. What is the purpose of using the break-even analysis?

The purpose of using Break-even analysis is: -

 To help businesses assess the market risks and the financial sustainability of
various operations.
 Identifying the fixed and variable costs.
 Assists organizations in realizing the minimal sales level required to cover all the
costs and begin generating a profit.
 Helps in comparing different business options.

2. Explain the two types of costs Frank must consider when doing the break-even
analysis.

The two types of costs Franks should take into consideration are: -

 Fixed cost- Costs that remain the same regardless of the level of production or
sales generated.
 Variable cost- costs that fluctuate according to the outputs generated by an
organization.

3. Generally speaking, which type of cost is higher for the make option and
which type of cost is higher for the buy option? Discuss Why.
The Make option has higher variable costs since it includes all production-related
expenses. And, in the case of the buy option, the fixed costs are higher as they
include logistical expenses, purchasing, contract fees, taxes, labour costs, and many
more.

4. What are other considerations besides cost you could recommend to Frank to
make a decision on making or buying?

When choosing to make or buy, there are a number of other considerations in addition to
cost, such as the organization's core competencies, market demand, manufacturing
capacity, and overall cost-effectiveness. In addition, if we consider both options
individually, Frank should consider making a product internally if the company has the
required expertise, technology, and resources. And, choose to buy the products if it is
cost-effective and efficient.