4MakeorBuyPg520 - Case Problem A Make-Or-Buy Analysis Chp11...

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Case Problem A Make-Or-Buy Analysis Chp11 Pg 520 Managers at Wager Fabricating Company are reviewing the economic feasibility of manufacturing a part that it currently purchases for a supplier. Forecasted annual demand for the part is 3200 units. Wagner operates 250 days per year. Wagner's financial analysts have established a cost of capital of 14% for the use of funds for investments within the company. In addition, over the past year $600,000 has been the average investment in the company's inventory. Accounting information shows that a total of $24,000 was spent on taxes and insurance related to the company's inventory. In addition, an estimated $9000 was lost due to inventory shrinkage, which included damaged goods as well as pilferage. A remaining $15,000 was spent on warehouse overhead, including utility expenses for heating and lighting. An analysis of the purchasing operation shows that approx. 2 hours are required to process and coordinate an order for the part regardless of the quantity ordered. Purchasing salaries average $28 per hour, including employee benefits. In addition, a
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This note was uploaded on 05/21/2011 for the course ECONOMY 101 taught by Professor Zaier during the Spring '11 term at Qatar University.

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4MakeorBuyPg520 - Case Problem A Make-Or-Buy Analysis Chp11...

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