Gabriela Manufacturing must decide whether to insourceor outsource a new toxic-free miracle carpet cleaner that workswith its Miracle Carpet Cleaning Machine. If it decides toinsource the product, the process would incur $300,000 of annualfixed costs and $1.50 per unit of variable costs. If it is outsourced,a supplier has offered to make it for an annual fixed cost of$120,000 and a variable cost of $2.25 per unit in variable costs.(a) Given these two alternatives, determine the indifferencepoint (where total costs are equal).(b) If the expected demand for the new miracle cleaner is300,000 units, what would you recommend that GabrielaManufacturing do?

Gabriela Manufacturing must decide whether to insourceor outsource a new toxic-free miracle carpet cleaner that workswith its Miracle Carpet Cleaning Machine. If it decides toinsource the product, the process would incur $300,000 of annualfixed costs and $1.50 per unit of variable costs. If it is outsourced,a supplier has offered to make it for an annual fixed cost of$120,000 and a variable cost of $2.25 per unit in variable costs.(a) Given these two alternatives, determine the indifferencepoint (where total costs are equal).(b) If the expected demand for the new miracle cleaner is300,000 units, what would you recommend that GabrielaManufacturing do?

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

ChapterC: Cases

Section: Chapter Questions

Problem 5.4SA

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Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. Is Ben Gibson acting legally? Is he acting ethically? Why or why not?
Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?
Gabriela Manufacturing must decide whether to insource(make) or outsource (buy) a new toxic-free carpet cleaner thatworks with its Miracle Carpet Cleaning Machine. If it decides toinsource the product, the process would incur $300,000 of annualfi xed costs and $1.50 per unit of variable costs. If it is outsourced,a supplier has off ered to make it for an annual fi xed cost of$120,000 and a variable cost of $2.25 per unit in variable costs.(a) Construct a base-case spreadsheet model that shows bothof these alternatives side-by-side. Use the same number ofunits (stored in a single cell) to drive the calculations.(b) If the expected annual demand for the new cleaner is300,000 units, what would you recommend that GabrielaManufacturing do? Provide evidence to support yourrecommendation.(c) Use Goal Seek to fi nd the indiff erence point (where totalcosts are equal) between these two alternatives. (Hint: GoalSeek can work only with a single “Set cell.”) Create a cell inyour model that…
Gabriela Manufacturing must decide whether to insource(make) or outsource (buy) a new toxic-free carpet cleaner thatworks with its Miracle Carpet Cleaning Machine. If it decides toinsource the product, the process would incur $300,000 of annualfi xed costs and $1.50 per unit of variable costs. If it is outsourced,a supplier has off ered to make it for an annual fi xed cost of$120,000 and a variable cost of $2.25 per unit in variable costs.(a) Construct a base-case spreadsheet model that shows bothof these alternatives side-by-side. Use the same number ofunits (stored in a single cell) to drive the calculations.(b) If the expected annual demand for the new cleaner is300,000 units, what would you recommend that GabrielaManufacturing do? Provide evidence to support yourrecommendation.(c) Use Goal Seek to fi nd the indiff erence point (where totalcosts are equal) between these two alternatives.
A business marketer (who is a potential supplier) is keen to supply cold-rolled (CR) steel coils to a major passenger car manufacturer, who has been buying the same material from three other suppliers on regular basis for the past few years. As per the purchase policy, the car manufacturer cannot buy any material from more than three suppliers. What should the business marketer do to supply CR steel coils to the major passenger car manufacturer?
eBook Problem 7-15 Par, Inc., is a small manufacturer of golf equipment and supplies. Par's distributor believes a market exists for both a medium-priced golf bag, referred to as a standard model, and a high-priced golf bag, referred to as a deluxe model. The distributor is so confident of the market that, if Par can make the bags at a competitive price, the distributor will purchase all the bags that Par can manufacture over the next three months. A careful analysis of the manufacturing requirements resulted in the following table, which shows the production time requirements for the four required manufacturing operations and the accounting department's estimate of the profit contribution per bag: Product Standard Deluxe Cutting and Dyeing 7/10 1 Production Time (hours) Sewing ½ 516 Finishing 1 2/3 Inspection and Packaging 1/10 1/₁ Profit per Bag $10 $9 The director of manufacturing estimates that 630 hours of cutting and dyeing time, 600 hours of sewing time, 708 hours of finishing…
A business marketer (who is ‘out’ or potential supplier) is keen to supply cold-rolled (CR) steel coils to amajor passenger car manufacturer, who has been buying the same material from three other suppliers onregular basis for the past few years. As per the purchase policy, the car manufacturer cannot buy anymaterial from more than three suppliers. What should the business marketer do to supply CR steel coils tothe major passenger car manufacturer?
As purchasing agent for Eynan Enterprises in Richmond, Virginia, you ask your buyer to provide you with a ranking of "excellent" (worth 4 points), "good" (3 points), "fair" (2 points), or "poor" (1 point) for a variety of characteristics for two potential vendors, Donna Inc. (D) and Kay Corp. (K). You suggest that "Products" total be weighted 0.4, the "Company" total be weighted 0.2, and the "Service" and "Sales" totals each be weighted 0.2. The buyer has returned the following ranking. Which of the two vendors would you select? Click the icon to view the rankings. Part 2 You should choose vendor ▼ Donna Inc. Either Kay Corp. or Donna Inc. Kay Corp. , with a weighted score of ________. (Enter your response rounded to one decimal place.)
40 - A hospital is evaluating whether to outsource or perform in-house a large set of blood and urine laboratory tests. The fixed cost of the laboratory equipment located in the hospital is $800,000 and the weighted average variable cost per test if performed in-house is $28.75. A third-party lab located three miles from the hospital will perform the same tests with more advanced and faster equipment. The lab distributes the results electronically to the hospital at a price of $31.00. If the annual volume last year was 250,000 tests, should the hospital do all lab tests in-house or outsource? Use the Excel template Break-Even to determine the best decision. Outsource Insource
One of your Taiwanese suppliers has bid on a new line of molded plastic parts that is currently being assembled at your plant. The supplier has bid $0.10 per part, given a forecast you provided of 200,000 parts in year 1; 300,000 in year 2; and 500,000 in year 3. Shipping and handling of parts from the supplier’s factory is estimated at $0.01 per unit. Additional inventory handling charges should amount to $0.005 per unit. Finally, administrative costs are estimated at $20 per month. Although your plant is able to continue producing the part, the plant would need to invest in another molding machine, which would cost $10,000. Direct materials can be purchased for $0.05 per unit. Direct labor is estimated at $0.03 per unit plus a 50 percent surcharge for benefits; indirect labor is estimated at $0.011 per unit plus 50 percent benefits. Up-front engineering and design costs will amount to $30,000. Finally, management has insisted that overhead be allocated if the parts are made in-house…