A company asked one of their analysis team to analyze and create models that help decide whether they should manufacture a particular product or outsource its production. The different components are given below.
Fixed Cost, FC = 25,000
Material Cost per Unit, MC = 2.15
Labor Cost per Unit, LC = 2.00
Outsourcing Cost per Unit, O = 4.50
Build a spreadsheet model and then use a two-way data table to show how the savings due to outsourcing changes as a function of different production volume and different bids on per-unit cost for outsourcing. Vary the production volume from 0 to 100,000 in increments of 10,000. The six bids are 3.11, 3.49, 4.50, 4.98, 5.12, and 5.45.
Q. 2A company asked one of their analysis team to analyze and create models that help decide whether they should manufacture a particular product or outsource its production. The different components are given below.
Fixed Cost, FC = 25,000
Material Cost per Unit, MC = 2.15
Labor Cost per Unit, LC = 2.00
Outsourcing Cost per Unit, O = 4.50
- Build a spreadsheet model and then construct a one-way data table with production volume as the column input and savings due to outsourcing as the output. Breakeven occurs when savings equal zero. Vary production volume from 0 to 100,000 in increments of 10,000. In which interval of production volume does breakeven occur?
- Using the appropriate Excel tool, find the exact breakeven point.
Q. 3A company asked one of their analysis team to analyze and create models that help decide whether they should manufacture a particular product or outsource its production. The different components are given below.
Fixed Cost, FC = 25,000
Material Cost per Unit, MC = 2.15
Labor Cost per Unit, LC = 2.00
Outsourcing Cost per Unit, O = 4.50
- Build an influence diagram that illustrates how to calculate the difference in cost of manufacturing and outsourcing.
- Using mathematical notation, construct a mathematical model for calculating the difference in cost of manufacturing and outsourcing.
- Implement your model from part (b) in an Excel spreadsheet model using the principles of good spreadsheet design.
- Using the spreadsheet model, what will be the resulting savings due to outsourcing if the company wants to make 30,000 units of a particular product?
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