A manufacturer is evaluating whether to outsource or perform in-house product specification testing. The fixed cost of the equipment located in the facility is $500,000, and the weighted average variable cost per test if performed in-house is $20.85. A third-party located three miles from the manufacturer will perform the same tests with more advanced and faster equipment. The third-party distributes the results electronically to the manufacturer at a price of $21.00. If the annual volume last year was 200,000 tests, should the manufacturer do all specification tests in-house or outsource? Use the Excel template Break-Even to determine the best decision.

A manufacturer is evaluating whether to outsource or perform in-house product specification testing. The fixed cost of the equipment located in the facility is $500,000, and the weighted average variable cost per test if performed in-house is $20.85. A third-party located three miles from the manufacturer will perform the same tests with more advanced and faster equipment. The third-party distributes the results electronically to the manufacturer at a price of $21.00. If the annual volume last year was 200,000 tests, should the manufacturer do all specification tests in-house or outsource? Use the Excel template Break-Even to determine the best decision.

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

ChapterC: Cases

Section: Chapter Questions

Problem 5.4SA

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