TenAlpina study case.docx - TenAlpina study case 1-Guilia...

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TenAlpina study case1-Guilia is clearly intrigued by the options that have opened for her. If she was to accept the customer'scontract and take over the forge, how would her business model change?Current cost model: Variable cost= 1.45+9=10.45$Fixed cost=0Outsourcing cost model:Variable costs: supplies=0.11 = (110/1000)Electricity= 0.18= ((1962-1908)/(1300-1000))Material =1.45Total per unit=1.74Fixed costs:labor=345,000Rent= 33,000Electricity=20736=((1962-(0.18*1300))*12Administrative costs=7200=(600*12)Total per year=420,291If she accepts the customer’s contract the cost would change going from outsourcing to insourcing, however the revenue wouldn’t be affected as the production alternatives won’t have a strong impact on the revenue’s model.2. Using Stanley's operating cost as your best-guess data about operating the forge, perform a simple break-even analysis for the two basic business model configurations- the currentoutsourcing arrangement versus owning and operating the forge.

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