In this case, we had 2 costs, fixed and variable, and 3 different options, reconstructing old equipment, purchasing new equipment, and outsourcing. This decision analysis tool allowed me to construct a crossover chart which showed the points at which the costs of the options demonstrated an advantage over the other.
A1. Submit a copy of the output from your decision analysis tool of choice. a. Explain why you chose the decision analysis tool you used.
The decision analysis tool I chose to solve this specific issue was the breakeven cost volume analysis tool, because it was easy to use and had specific parameters already in place to account for each type of cost and the number of options available. Since there are two costs (fixed and variable) and three different options (reconstructing, purchasing, or outsourcing), the decision analysis tool allowed me to graph a crossover chart that detailed the points at which the cost of each option became advantageous over the other.
A review of the breakeven analysis shows that the breakeven points for each option are as follows:
Option | Breakeven Point | Cost | Recondition vs. Outsource | 25 units | $75,000 | Purchase vs. Outsource | 80 units | $240,000