Samsung Electronics is trying to reduce supply chain risk by making more responsible make/buy decisions through improved cost estimation. A high-use component (expected usage is 5000 units per year) can be purchased for $25 per unit with delivery promised within a week. Alternatively, Samsung can make the
Samsung Electronics is trying to reduce supply chain risk by making
more responsible make/buy decisions through improved cost estimation. A high-use
component (expected usage is 5000 units per year) can be purchased for $25 per
unit with delivery promised within a week. Alternatively, Samsung can make the
component inhouse and have it readily available at a cost of $5 per unit, if
equipment costing $150,000 is purchased. Labor and other operating costs are
estimated to be $35,000 per year over the study period of 5 years. Salvage is
estimated at 10% of first cost and MARR is 12% per year. Neglect the element of
availability (a) to determine the breakeven quantity, and (b) to recommend making
or buying at the expected usage level.
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