Question

HUWUR Sayed Help Save & Exit Sube Problem 10-5 (Algo) 3 WatchNU is a company that designs and manufacturers drones for military use. The supply manager is getting ready to renegotiate the contract with the security service provider that it uses for its offices and manufacturing plant. Three suppliers responded to the RFP for security services for the next three years. The current security services provider, Securell quoted $938,000 per year. Two suppliers that have not been used by WatchNU in the past quoted $844,000 and $952,000 respectively. The supply manager is also analyzing the costs associated with insourcing security services rather than using a supplier as a way to reduce costs and provide greater control over security. The salary and benefits for a full-time security services manager is estimated to be $96,000. Other fixed costs are estimated to be $26.000/year. Three security guards are needed 24 hours/day, 365 days per year. The salary and benefits for the security guards is $3Vhour. a. What are the costs to insource the security services? Book erences Variable cost Fixed cost Total cost

Answer 1

Ans:

Costs to insource the security services:

Calculations are hand written:

Ans (a):

Variable Cost = $814,680

Fixed Cost = $122,000

Total Cost = $936,680

Ans (b): Insource

Because the total cost in insource service is less as compared to current outsource service.