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How do I do part B? The ABC Company had two options for sourcing molded plastic parts, and these options are presented in the table
How do I do part B?
The ABC Company had two options for sourcing molded plastic parts, and these options are presented in the table below. Now, the ABC Company has identified another potential supplier for the molded plastic parts. The new supplier has bid $0.1400 per part but also will impose a shipping and handling charge of $0.0200 per unit. Additional inventory handling charges should amount to $0.0010 per unit. Finally, purchasing costs are estimated at $10 per month for the length of the 36-month contract. Note that the forecasted demand is a total of 1 million units over the 36 months. Click the icon to view the total cost analysis for the sourcing decision at ABC. a. The total cost per unit for the new supplier is $ The outsourcing option with the new supplier is (Enter your response rounded to four decimal places.) than insourcing. b. Suppose the three-year volume is expected to rise to 1.5 million, rather than 1 million, molded plastic parts. The total cost per unit associated with insourcing is now $ ( (Enter your responses rounded to four decimal places.) \begin{tabular}{lll} \hline Insourcing option & & \\ \hline Operating Expenses & & \\ Direct labor & $0.0600 & \\ Benefits (50\%) & $0.0300 & \\ Direct material & $0.0200 & \\ Indirect labor & $0.0054 & \\ Benefits (50\%) & $0.0027 & \\ Equipment depreciation & $0.0080 & $8,000 absorbed over 1,000,000 \\ Overhead & $0.0100 & units \\ Engineering/design costs & $0.0500 & $50,000 absorbed over 1,000,000 \\ Total cost per unit & $0.1861 & \\ \hline Outsourcing option & & \\ \hline Purchase price & $0.1500 & \\ Shipping and handling & $0.0140 & \\ Inventory charges & $0.0080 & \\ Administrative costs & $0.0012 & \\ Total cost per unit & $0.1732 & \\ & & \\ Savings per unit & $0.0129 & \\ Total savings (1 million units) & $12.900 & \end{tabular}
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