Prepare a one-page summary/recommendation on your reading of the case. N 1L12. I I11Angel City Trailer Works4 IMIMReviewU16ViewLE IINE7.AcrobatI8I INI10. I 11. I12.I 1 131 U 14115 116 1 176 1. 18.Vincent Thomas, materials manager at Angel City Trailer Works, Inc. in San Pedro, CA, was considering a proposalfrom his purchasing agent to outsource manufacturing for an outrigger bracket. It was the end of April and Mr.Thomas had to evaluate the proposal and make a decision regarding whether to proceed.COMPANY BACKGROUNDAngel City Trailer Works, Inc. (ACTW) manufactures trailers for highway transport trucks. The company is comprisedof three divisions: Trailer Works, Sandblast & Paint, and Metal Fabrication Divisions. Each division operatesseparately, but manufacturing operations between each are highly integrated. The Metal Fabrication Divisionproduces most of the component parts for the trailers, the Trailer Works Division performs the assembly operations,and the Sandblast & Paint Division is responsible for completing the sandblasting and final painting operation. AngelCity Trailer Works manufactures approximately 200 trailers per year, with about three-quarters produced during themonths of January to MayTHE OUTRIGGER BRACKETThe outrigger bracket, part number ORBKT1, is an accessory that can be used to secure an oversized container to atrailer. The bracket consists of four component parts welded together, and each trailer sold by Angel City TrailerWorks has 20 brackets: 10 per side.The Metal Fabrication Division of ACTW is presently manufacturing the outrigger bracket. The subassembly parts(ORBKT-1, ORBKT-2, ORBKT-3, and ORBKT-5) are processed on a burn table, which cut the raw material to size. Thefinal assembly operation WS-ORBKT, is performed at a manual welding station.Manufacturing lead time for the outrigger bracket is 10 days. However, the Metal Fabrication Division has been ableActivate Vto coordinate supply and production with assembly operations. Consequently, finished inventory levels of theoutrigger bracket are kept to a minimum and safety stock levels are negligible. Angel City Trailer Works' inventoryholding (aka carrying) costs are 25% of the inventory value per year.English (United Kingdom)1163°F Haze 16 17 118THE OUTSOURCING DECISIONIn an effort to reduce costs, the purchasing agent, Debbie Jones, who reported to Vincent Thomas, solicited quotesfrom three local companies to supply the outrigger bracket. Gaffey Street Steel Fabricators (Gaffey Street), a currentsupplier to Angel City Trailer Works for other components, offered a competitive bid, with a cost of $122.34, FOBAngel City Trailer Works' loading dock. Vincent met with the controller, Mike A. Lorry, who provided a breakdown ofthe manufacturing costs for the outrigger bracket. Looking at the Excel spreadsheet, Mike commented: "These arebased on estimates of our costs from this year's budget. Looking at the material, labor, and overhead costs, I wouldestimate that the fixed costs for this part are in the area of about 18%. Keep in mind that it costs us about $55 onaverage to place an order with our vendors.PartORBTK 1ORBTK 2ORBTK 3ORBTK 4WS- ORBTKACT Manufacturing costs$20.60$18.78$46.27$12.07$60.83Total$158.55Vincent expected that Angel City Trailer Works would have to arrange for extra storage space if he decided tooutsource the outrigger bracket to Gaffey Street, who had quoted delivery lead time of four weeks. Because GaffeyStreet was local and had a good track record, Vincent didn't expect the need to carry much safety stock, but theorder quantity issue still needed to be resolved.Angel City Trailer Works is operating in a competitive environment and Vincent has been asked by the divisiongeneral manager to look for opportunities to reduce costs. As he sat down to review the information, Vincent knewthat he should make a decision quickly if it was possible to cut costs by outsourcing the outrigger bracket.ActivaGo to Se63°F F

In order to cut expenses, Angel City Trailer Works (ACTW) is thinking of contracting Gaffey Street…

Answered: Prepare a one-page…

Prepare a one-page summary/recommendation on your reading of the case.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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