Outsourcing Analysis Your company sells riding gloves and has the following three options: Option 1: Make your own gloves at your own plant Fixed cost at own plant = $3 million Variable cost/pair at own plant = $5 Option 2: Outsource to a supplier in the same town Fixed cost at supplier’s plant = $2 million Variable cost/pair at supplier’s plant= $7 Option 3: Buy from Mexico at $4/pair but you need to pay a one-time set-up fee of $6 million Indicate over what range each of the alternatives Option 1, 2, 3 is the low-cost choice. Please show all calculations.
Outsourcing Analysis Your company sells riding gloves and has the following three options: Option 1: Make your own gloves at your own plant Fixed cost at own plant = $3 million Variable cost/pair at own plant = $5 Option 2: Outsource to a supplier in the same town Fixed cost at supplier’s plant = $2 million Variable cost/pair at supplier’s plant= $7 Option 3: Buy from Mexico at $4/pair but you need to pay a one-time set-up fee of $6 million Indicate over what range each of the alternatives Option 1, 2, 3 is the low-cost choice. Please show all calculations.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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| Outsourcing Analysis | ||||||||||||
| Your company sells riding gloves and has the following three options: | ||||||||||||
| Option 1: Make your own gloves at your own plant | ||||||||||||
| Fixed cost at own plant = $3 million | ||||||||||||
| Variable cost/pair at own plant = $5 | ||||||||||||
| Option 2: Outsource to a supplier in the same town | ||||||||||||
| Fixed cost at supplier’s plant = $2 million | ||||||||||||
| Variable cost/pair at supplier’s plant= $7 | ||||||||||||
| Option 3: Buy from Mexico at $4/pair but you need to pay a one-time set-up fee of $6 million | ||||||||||||
| Indicate over what range each of the alternatives Option 1, 2, 3 is the low-cost choice. | ||||||||||||
| Please show all calculations. |
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