A Company Asked One of Their Analysis Team to Analyze

Essay

A company asked one of their analysis team to analyze and create models that help decide whether they should manufacture a particular product or outsource its production. The different components are given below:
Fixed Cost, FC = $25,000
Material Cost per Unit, MC = $2.15
Labor Cost per Unit, LC = $2.00
Outsourcing Cost per Unit, O = $4.50
Note that per-unit material and labor cost together make up the variable cost per unit. a. Build an influence diagram that illustrates how to calculate the difference in cost of manufacturing and outsourcing.
b. Using mathematical notation, give a mathematical model for calculating the difference in cost of manufacturing and outsourcing.
c. Implement your model from part (b) in Excel using the principles of good spreadsheet design.
d. If the company wants to make 30,000 units of a particular product, what are the savings due to outsourcing?