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That last question might be one of the most important of all. Chances are good you would say an hour's worth of your free time
That last question might be one of the most important of all. Chances are good you would say an hour's worth of your free time is worth at least $40. Since this would likely take an hour plus the expense of oil, tools and disposal, is it really worth doing it yourself? Create an Excel spreadsheet to conduct a make or buy analysis of the following: You manage a large multi-national business that manufactures/builds commercial airliners. In an effort to reduce costs, you are considering outsourcing some of the parts used to build the planes. You start with the parts that are used most often. We will call these "A" parts. The estimated costs of producing 8,000 "A" parts in house are: Per Unit Total Direct Materials $13 $104,000 Direct Labor 80,000 Applied Variable Factory 88,000 Overhead 10 11 Applied Fixed Factory Overhead 120,000 15 $49.00 $392,000.00 You can buy this part from a supplier overseas for only $41.49 each. You hay never worked with this supplier before, but the price difference appears as if could save your organization some money. If you purchased from the supplier, 50% in fixed factory overhead would be saved. (NOTE: Keep in mind that Fixed overhead is overhead you must pay even if the factory is not producing anything!) Using Excel, perform the calculations necessary to determine if you should make or buy
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