A manufacturer has decided to outsource and offshore a small electric motor that it currently manufactures itself. It has found an offshore supplier that charges $925,000 for a minimum order quantity of 5,000 motors. Shipping costs for this quantity are $15,000. The buyer expects to place four orders per year to meet its annual need for 20,000 motors. Annual carrying cost is 25% of unit price, and import tariffs are 12% of unit price. The company expects to spend $12.500 per year on contracting and relationship maintenance. What is the total cost of outsourcing and offshoring this motor? 1) $208.65 per unit | 2) $212.28 per unit 3) $213.71 per unit 4) None of these choices

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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A manufacturer has decided to outsource and offshore a small electric motor that it
currently manufactures itself. It has found an offshore supplier that charges
$925,000 for a minimum order quantity of 5,000 motors. Shipping costs for this
quantity are $15,000. The buyer expects to place four orders per year to meet its
annual need for 20,000 motors. Annual carrying cost is 25% of unit price, and import
tariffs are 12% of unit price. The company expects to spend $12.500 per year on
contracting and relationship maintenance. What is the total cost of outsourcing and
offshoring this motor?
1) $208.65 per unit
2) $212.28 per unit
3) $213.71 per unit
4) None of these choices
Transcribed Image Text:A manufacturer has decided to outsource and offshore a small electric motor that it currently manufactures itself. It has found an offshore supplier that charges $925,000 for a minimum order quantity of 5,000 motors. Shipping costs for this quantity are $15,000. The buyer expects to place four orders per year to meet its annual need for 20,000 motors. Annual carrying cost is 25% of unit price, and import tariffs are 12% of unit price. The company expects to spend $12.500 per year on contracting and relationship maintenance. What is the total cost of outsourcing and offshoring this motor? 1) $208.65 per unit 2) $212.28 per unit 3) $213.71 per unit 4) None of these choices
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