Would outsourcing make sense for a manufacturing operation
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For the data below, determine whether outsourcing of the particular manufacturing operation makes financial sense:
1. The current variable cost per unit is $10.00.
2. The current fixed costs in total is $100,000.
3. The current fixed costs attributed to this product line is $60,000.
4. The quote from an outside vendor to perform the operation is $13.00.
5. The anticipated volume of widgets needed is 10,000.
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Solution Summary
The solution provides calculations of a company's financial information and then explains whether outsourcing for the product in question would make sense with the given set of facts.
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Cost to outsource:
10,000 widgets * $13 = $130,000
Cost to produce without outsourcing:
Variable costs 10,000 * $10 = $100,000
Fixed costs attributable to this product line = ...
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