Question

A large global automobile manufacturer is considering outsourcing the manufacturing of a solenoid used in the transmission of its SUVs. The company estimates that annual fixed costs of manufacturing the part​ in-house, which include​ equipment, maintenance, and​ management, amounts to ​$7.7 million. The variable costs of labor and material are ​$6.50 per unit. The company has an offer from a major subcontractor to produce the part for ​$10.25 per unit.​ However, the subcontractor wants the company to share in the costs of the equipment. The automobile company estimates that the total cost would be $ 4.4 ​million, which also includes management oversight for the new supply contact. a. How many solenoids would the automobile company need per year to make the​ in-house option least​ costly?

a. How many solenoids would the automobile company need per year to make the​ in-house option least​ costly?

The company must consume (more than or less than) _____ solenoids to make the manufacturing the part​ in-house option least costly. ​(Enter your response rounded to the nearest whole​ number.)

b. What other​ factors, besides​ costs, should the automobile company consider before revising its supply chain for​ SUVs?

Answer 1

a)

b)

The optfon uofth kease volumes Subcontracting cost is beter f Ad lower has lesser fixed cost Potnt or manejacturing i-house (a Let the crass -over and subcon tacting be are ovepoint, costs from koth the options A cross - the same 4400000 o-a5 7,7000006.5i. 88 0000 Solenofds Compauy must consune to make more than eroooo solenofds manufacturing in-houae liast costly

Other factors to be considered are:

> Quality

> Timely deliveries

> Knowledge outflow to external parties