Graham Douglas is a guard dog training business based in Coventry, the United Kingdom. The business trains and sells different breeds of guard dogs. The dogs are usually purchased from local dog breeders for 250 each. The cost of feeding each dog and providing veterinary treatments is 520 per year. The dogs are usually trained for 12 months before being sold. The business employs a dog trainer and two dog walkers who are paid a total of 1,850 per dog. The company occupies a 124 sq. metre estate and pays annual rent of 15,000. Other bills such as water, gas, and electricity amount to 2,000 per annum but 50% of these are variable. The business also pays annual council tax of 1,200 for its business operation. There are no other expenses associated with the business.

The cost per trained guard dog is summarized as:

Purchase of dog 250

Feeding and veterinary treatments 520

Wages 1,850

Fixed overheads:

Rent 15,000

Council tax 1,200

Water, gas and electricity 2,000

Total cost 20,820

The business has recently received an order from the London Charity for the Blind Trust for the supply of 60 trained German Shepherd breed of guard dogs. The charity plans to distribute these to its members at the next Christmas.

Graham Douglas is negotiating with Billy Jack, a reputable guard dog trainer in Germany, to buy the 60 trained guard dogs at 5,000 each.

REQUIRED:

Advice Graham Douglas whether the business should buy the dogs from Billy Jack or train the dogs themselves.

What other considerations should management consider when making a make-or-buy decision?