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A company asked one of their analysis team to create a model that helps decide whether they should manufacture a particular product or outsource its
A company asked one of their analysis team to create a model that helps decide whether they should manufacture a particular product or outsource its production. The following influence diagram and the spreadsheet model illustrate how to calculate the difference in cost of manufacturing and outsourcing. Difference in Cost of Manufacturing and Outsourcing Total Total Manufacturing Outsource Cost Cost Fixed Variable Quantity Outsourcing Cost Cost Required Cost per Unit Material cost Labor cost per unit per unitParameters 3 4 5 HI {Fixed cost of manufacturing aoooo 6 Material cost per unit _ 11.5 ? Labor cost per unit 3.5 3 P [Per-unit variable cost of purchasing) 6.5 9 11} Model _ 11 q {quantity} zoom} 12 TMC {total cost to produce) 13 TPC [Total cost to outsource] 14 Saving due to Outsourcing If the production volume is 20,000, what will be the Total Manufacturing Cost? O 440000 O 375000 483210 O 424000
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