Will buying a roaster and its maintenance cost more or less than continuing to buy from a supplier?
Buying no roaster, will result in no fixed costs, and variable cost of $3/lb.
Buying the roaster, will result in fixed costs of $35,000 and variable cost of $1.60/lb.
Buy the Roaster
Low Demand EV: $47,440 Medium Demand EV: $56,540 High Demand EV: $69,540
Do Not Buy the Roaster
Our recommendation for this situation is for the company not to buy the roaster. There is a 2/3 chance that with the purchase of the roaster they will make less money since if the demand is low or medium they will not be profitable.