HW3-BreakEeven-Sourcing-solution

# HW3-BreakEeven-Sourcing-solution - much must demand...

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HW#3 1. Ch4 - #6 (6 points) 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 (2 points) b. SBARG cost = \$75,000 + \$30 (2,000) = \$135,000 (1 point) c. \$131,600 = \$75,000 + VC(2,000) VC = \$28.30 (2 points) 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 (1 point). 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 (1 point)? 2. Annual fixed costs are \$900,000 and \$800,000 for outsourcing and insourcing, respectively, and variable costs are \$28 and \$32 for outsourcing and insourcing, respectively. If current annual demand is 22,000 units, by how
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Unformatted text preview: much must demand increase in order for outsourcing to become cheaper? (2 points) Ans: 3000 units (Q* = (FC Make-FC Buy ) / (VC Buy-VC Make ) = (\$800,000 - \$900,000)/(\$28 - \$32) = 25,000; 25000 – 22000 = 3,000) 3.Boys `R Us sells suits to young men. Management is considering vertical integration. It is determined that the company can produce its own suits for a fixed annual cost of \$2,000,000 and a production cost of \$100 per suit. The current supplier charges a \$2,500,000 fixed annual cost and \$120 per suit. Over what ranges of demand is each option best? (2 points) Ans: insourcing is always preferable (Q* = (FC Make-FC Buy ) / (VC Buy-VC Make ) = (\$2,000,000 - \$2,500,000)/(\$120 - \$100) = - 25,000)...
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## This note was uploaded on 10/17/2011 for the course MNGT 368 taught by Professor Curthurds during the Spring '08 term at Nicholls State.

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