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Cost Justification

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In a 1998 press release, Boeing Commercial Airplane Group (BCAG) announced
that it was signing a 10-year contract with distributor Thyssen Inc. - a distributor
of raw aluminum - valued at approximately $300 million. The contract reflects
Boeing's effort to reduce costs and production bottlenecks resulting from supply
shortages. The contract specifies prices and guarantees quantities of raw
aluminum to be delivered to BCAG's suppliers. If you were the production
manager at BCAG, how would you justify the long-term nature of the contact
with Thyssen Inc.?

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Solution Preview

If I were the production manager for BCAG I would argue that:

1. Supply shortages are costly because they can stop all our production lines which means all our fixed costs (which include labour on ...

Solution Summary

Cost justification for Boeing Commercial Airplane Groups are examined.