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Outsourcing (Make-or-Buy) Decision




Question;Outsourcing (Make-or-Buy) DecisionAssume;a division of Hewlett-Packard currently makes 12,000 circuit boards per;year used in producing diagnostic electronic instruments at a cost of;$34 per board, consisting of variable costs per unit of $24 and fixed;costs per unit of $10. Further assume Sanmina-SCI offers to sell;Hewlett-Packard the 12,000 circuit boards for $34 each. If;Hewlett-Packard accepts this offer, the facilities currently used to;make the boards could be rented to one of Hewlett-Packard's suppliers;for $46,000 per year. In addition, $6 per unit of the fixed overhead;applied to the circuit boards would be totally eliminated.Calculate the net benefit (cost) to HP of outsourcing the component from Samina-SCI.


Paper#54251 | Written in 18-Jul-2015

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