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    Liquid Chemical Co Case Study: Favorable Actions; Advantages

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    What are the advantages of one alternative over the other?

    Which action would you favor?

    © BrainMass Inc. brainmass.com March 4, 2021, 6:19 pm ad1c9bdddf


    Solution Preview

    What are the advantages of one alternative over the other?

    The advantage of subcontracting is
    There is a direct saving of 378,700 - 325,000 = $53,700
    The extra warehouse space need not be rented and that would bring savings of $17,000 rent.
    The advantages of not subcontracting are.
    Savings on machinery 240,000/8 = 30,000 per year, usage for 4 years.
    So, 120,000 - salvage money 40,000 = $80,000 loss on machinery averted.

    Savings on special chemical:
    200,000 - 40,000(used) = 160,000: 20% loss on sales that is $32,000 loss on sales and $32,000 opportunity cost.

    Use of general administrative overheads. ...

    Solution Summary

    In a 403 word solution, the response provides excellent data for the decision process. Calculations are shown as required.