Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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1.if manufacturing capacity can only be utlized in manufacturing the keyboards what should company do, make/buy?
if the company could utlize the spare capacity in producing 30,000 modems,with vaiable cost $12 per unit.what should the company do, knowing that it can sell the modems at $22 per unit?
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company manufactures Keyboards. It has production capacity of 30,000 units per
month
Fixed Costs: $60,000 per month
Selling Price of each keyboard: $15.00 per unit
The following table summarizes cost of manufacturing in-house.
Cost,
Item
$/Units
Material
5.50
Labor
1.75
Variable
overhead 0.75
An external vendor (a different manufacturer) has offered to supply the keyboards at
$8.50 per unit.
804
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Step 1
Given Information:
Production capacity = 30,000 units
Fixed Costs = $ 60,000 per month
The selling price of each keyboard = $ 15 per unit
Cost table for in house manufacturing:
Cost of buying a keyboard from a different manufacturer: $ 8.5 per unit
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Step 2
A. Make/Buy Decision
The calculation for profit at In-house production:
The calculation for profit when production is outsourced:
Thus, the company should buy keyboards from a different manufacturer.
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