For a quantity of 25,000 pumps, Marine should outsource to Bayfront the production of the filter systems. See the calculations below for confirmation. Total Cost In-house = $370,000 + ($11.27)(25,000) = $651,750 Total Cost Outsource to Bayfront = ($25)(25,000) = $625,000 Using the Break-Even spreadsheet template: 7.* A firm is evaluating the alternative of manufacturing a part that is currently being outsourced from a supplier. The relevant information is provided below: For in-house manufacturing: Annual fixed cost = $100,000 Variable cost per part = $140 For purchasing from supplier: Purchase price per part = $160 Using this information, determine the break-even quantity for which the firm would be indifferent between manufacturing the part in-house or outsourcing it. Using Equation 2.1 we compute Q* = ______FC_______ = $100,000 = 5,000 parts VC2 - VC1 $160 - $140 If demand is greater than 5,000, then produce in-house (manufacture) If demand is less than or equal to 5,000, then outsource We may also use the Break-Even spreadsheet template to identify the break-even point, either by experimentation or using Excel’s Goal Seek tool (instructors might wish to illustrate this). 8.* Refer to the information provided in question 7 to answer the following: a. If demand is forecast to be 5,500 should the firm make the part or purchase it from a supplier? b. The marketing department forecasts that the upcoming year’s demand will be 5,500 parts. A new supplier offers to make the parts for $156 each. Should the company accept the offer? c. What is the maximum price per part the manufacturer should be willing to pay to the supplier if the forecast is 5,500 parts, using the information in the original problem (Question #7). If demand is greater than 5,000, then produce in-house (manufacture). In this case, the part should be made in-house.
For a quantity of 25,000 pumps, Marine should outsource to Bayfront the production of the filter systems. See the calculations below for confirmation. Total Cost In-house = $370,000 + ($11.27)(25,000) = $651,750 Total Cost Outsource to Bayfront = ($25)(25,000) = $625,000 Using the Break-Even spreadsheet template: 7.* A firm is evaluating the alternative of manufacturing a part that is currently being outsourced from a supplier. The relevant information is provided below: For in-house manufacturing: Annual fixed cost = $100,000 Variable cost per part = $140 For purchasing from supplier: Purchase price per part = $160 Using this information, determine the break-even quantity for which the firm would be indifferent between manufacturing the part in-house or outsourcing it. Using Equation 2.1 we compute Q* = ______FC_______ = $100,000 = 5,000 parts VC2 - VC1 $160 - $140 If demand is greater than 5,000, then produce in-house (manufacture) If demand is less than or equal to 5,000, then outsource We may also use the Break-Even spreadsheet template to identify the break-even point, either by experimentation or using Excel’s Goal Seek tool (instructors might wish to illustrate this). 8.* Refer to the information provided in question 7 to answer the following: a. If demand is forecast to be 5,500 should the firm make the part or purchase it from a supplier? b. The marketing department forecasts that the upcoming year’s demand will be 5,500 parts. A new supplier offers to make the parts for $156 each. Should the company accept the offer? c. What is the maximum price per part the manufacturer should be willing to pay to the supplier if the forecast is 5,500 parts, using the information in the original problem (Question #7). If demand is greater than 5,000, then produce in-house (manufacture). In this case, the part should be made in-house.
Solution-Manual-OM-4-4th-Edition-Collier.docx