ch04 - FFI to produce a quality product, the ability of FFI...

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Chapter 4 Answers to Problems 2. Indifference Point: Total cost of insourcing = total cost of outsourcing Total Cost = FC+VC(Q) The price from a new supplier is now $1.80. The new fixed cost is $200,000. 300,000 + 1.5(Q) = 200,000 + 1.8(Q) Q = 333,333.3 units Since the demand of 300,000 is lower than the indifference point, outsourcing is a cheaper alternative. The actual difference may be computed to be $10,000 4. a. Using the current demand of 160,000 units: Total Cost from FFI = 230,000 + .23(Q) = $266,800 $2,200 lower than insourcing. b. Indifference point: Total cost of insourcing = total cost of outsourcing 125,000+0.90Q = 230,000 + 0.23Q Q = 156,716.41, so better to outsource when demand is 156,717 or more. c. Additional factors that need to be considered include the economic stability of FFI, the technical ability of
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Unformatted text preview: FFI to produce a quality product, the ability of FFI to “partner”, the ability of FFI to deliver on time, and the impact of outsourcing on remaining employees. 6. a. fulltime costs = 2 x ($36,000 x 1.3) = $93,600 part time cost = $18,000 Variable Cost = $10(2,000) = $20,000 Total Cost = $131,600 b. SBARG cost = $75,000 + $30 (2,000) = $135,000 c. $131,600 = $75,000 + VC(2,000) VC = $28.30 d. Cal might investigate if he could do more with part time employees or investigate if the variable costs could be reduced from the existing $10. e. How stable is the future of SBARG? How good is the estimated 2,000 accounts receivable? How reliable is SBARD compared to his own staff?...
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This note was uploaded on 06/12/2011 for the course MNGT 368 taught by Professor Curthurds during the Spring '08 term at Nicholls State.

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