Saturday, July 20, 2013

BUS 515 Problems Chapter 4 Week 3 – Perfect Solution

BUS 515 Problems Chapter 4 Week 3 – Perfect Solution
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BUS 515 Week 3 Chapter 4 Problems
2. Gabriela Manufacturing was able to find a new supplier
that would provide the item for $1.80 per unit with an annual
fixed cost of $200,000. Should Gabriela Manufacturing insource
or outsource the item?
4. Fast Finish, Inc. (FFI) has made a technological breakthrough
in snow board finish application. FFI will apply the finish for $0.23
per unit in variable costs plus a fixed annual cost of $230,000. Use
the cost and demand information given in Problem 3 for Downhill
Boards to evaluate this proposal.
(a) What will it cost Downhill Boards to outsource the finishing
process?
(b) At what demand level does it make sense economically to
outsource the finishing process?
(c) What additional factors should be considered when making
this outsourcing decision?
6. Cal’s Carpentry is considering outsourcing its accounts receivable
function. Currently, Cal employs two full-time clerks
and one part-time clerk to manage accounts receivable. Each
full-time clerk has an annual salary of $36,000 plus fringe benefits
costing 30 percent of their salary. The part-time clerk makes
$18,000 per year but has no fringe benefits. Total salary plus
fringe cost is $111,600. Cal estimates that each account receivable
incurs a $10 variable cost. The Small Business Accounts Receivables
Group (SBARG) specializes in handling accounts
receivable for small- to medium-size companies. Doris Roberts
from SBARG has offered to do the accounts receivable for Cal’s
Carpentry at a fixed cost of $75,000 per year plus $30 per account
receivable. Next year, Cal expects to have 2000 accounts
receivable.
(a) Calculate the cost for Cal’s Carpentry to continue doing
accounts receivable in-house.
(b) Calculate the cost for Cal’s Carpentry to use SBARG to
handle the accounts receivable.
(c) If the fixed annual cost offered by SBARG is nonnegotiable
but it is willing to negotiate the variable cost, what
variable cost from SBARG would make Cal indifferent to
the two options?
(d) What other alternatives might Cal consider in terms of
his current staffing for accounts receivable?
(e) What additional criteria should Cal consider before outsourcing

the accounts receivable?

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