Assume you are in charge of procuring a new component for one of your contract customers....
Assume you are in charge of procuring a new component for one of your contract customers. This component can be made in-house or outsourced. If you decide to outsource it there is a fixed start-up investment of $7,875. The per-unit cost in-house is $25. If production is outsourced the unit price drops to $24.30 (FOB destination). The contract is for 45,000 units.
a. What is the total cost of the contract if you decide to make it in-house? (Show your work with formulas used)
b. What is the total cost of the contract if you decide to outsource (Show your work with formulas used):
c. How many units into the outsourcing contract would it take to break-even on the start-up funds of $7,875 if the start-up funds was paid for out of the per-unit cost savings alone?
d. If the contract was to supply your customer with 1,250 units per month, how long (in months) would it take to break-even on the start-up investment?
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Assume you are in charge of procuring a new component for one of
your contract customers....
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Hahn Manufacturing purchases a key component of one of its products from a local supplier. The current purchase price is $1,500 per unit. Efforts to standardize parts succeeded to the point that this same component can now be used in five different products. Annual component usage should increase from 150 to 850 units. Management wonders whether it is time to make the component in-house, rather than to continue buying it from the supplier. Fixed costs would increase by about $60,000...
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if you could add the equations used to find each that would be
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