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Rockwall Industries is a technology subcontractor for the United States Navy. They are providing a new computer system to be installed throughout the Navy installations.

Rockwall Industries is a technology subcontractor for the United States Navy. They are providing a new computer system to be installed throughout the Navy installations. However, the computer system requires a unique harness which attaches to legacy systems. The problem is that manufacturing harnesses is not a core competency of Rockwall Industries. Accountants form Rockwall Industries have calculated that if they were manufacture the harnesses in-house, each harness would cost approximately $35 (from data from previous builds) to manufacture with fixed costs being $225,000 to establish a set-up to produce. Rockwall has also subcontracted with Steadfast Harnesses in the past. Steadfast Harnesses has quoted each unit cost to be $50 if they were to be contracted for the job. In addition, Rockwall has determined that there would be a fixed one-time administration charge from the vendor of $50,000 to do business. A) Place the data in the appropriate data cells. B) Place the appropriate formulas given in column I to the appropriate place in columns B, C and D. C) Using Excel, how many harnesses must Rockwall make themselves to be feasible versus purchasing them from an external vendor? The forecast is that Rockwall may need between 11,600 and 11,800 for them to be feasible to do in-house. D) Make a Scatter Line Chart on this worksheet. Using the Production Qty, Manufacturing Cost vs. the Purchasing Cost... make a scatter chart with lines to show the breakeven crossover point. Label your chart "Make or Buy". Use the Production Quantity Range of 8,000 - 17,000 in 1,000 increments.

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A B C D E F G H K L M Purchase Manufacture In-House Step 1. Primary Variables: Fixed Cost Range Name Cel Unit Cost ManufactureFixed Cost D2 Objective Functions Total Cost Manufacture TotalCost D4 Manufactured Total Cost = ManufactureFixedCost+ManufactureUnitCost*Q Manufacture UnitCost D3 Purchased Total Cost = =PurchaseFixedCost+PurchaseUnitCost*Q Hamesses to make (Q) Purchase FixedCost B2 Profit/Loss = Purchase TotalCost-Manufacture TotalCost Profit/Loss if In-House Purchase TotalCost B4 Purchase UnitCost B3 Q C6 10 11 12 Graph Points Production Qty Manufacture Cost Purchase Cost 14 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

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