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Economic Concepts of Life Cycle Cost Analysis

Butler is concerned that the cross-functional team may have individuals on the team who do not understand some of the issues at hand, especially the economic aspects of the decision, including the origins and foundation of the economics of exchange. With only 30 days until recommendations are made to the senior leadership team, Butler has asked you to prepare a workbook for the weekly staff meeting to help the team to understand the background of the upcoming evaluation and decision, beginning with an explanation of the economics of exchange and the economic aspects of the firm. Butler also states that he wants you to explain to the team the concepts of value and utility and how those factors are considered in the decision-making process.

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Please refer to the attached file for the response.

ECONOMIC ASPECTS OF OUTSOURCING DECISION: A GUIDE FOR THE ANALYSIS

Background
One of the options to cope with the increasing demand of the recently introduced product is outsourcing - either a portion of the company's activities or a portion of the needed volume of production. While this may help the company cope with the forecasted increase in demand, the company is concerned that the cross-functional team members may not understand some of the issues at hand, especially the economic aspects of the decision, including the origins and foundation of the economics of exchange.
Specific aspects and issues that are of relevance and must be understood by all concerned are the following:
1. Value
The concept of value may be applied to both the organization and the individuals. Applied to the organization, the decision may be contributory to the realization of the goal of the firm which is maximization of value to its shareholders.
As applied to the individuals, the growth of the company may also mean growth of the parts or the individual employees. They may be given more opportunity to occupy better and higher positions, and consequently, better earnings and improvement in the quality of their life. What is important however is that the company must emphasize that whatever decision that would be made, it will be for the good of the organization as a whole.
The value of the service may have an implication on the price that will be asked by the service ...

Solution Summary

The economic concepts of life cycle cost analysis is examined.

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