Pretend you are again a manager of your favorite manufacturing company. you have been asked to determine whether a product (one of your choosing) should be manufactured in-house or outsourced to another vendor. discuss the relevant costs you would consider for this decision as well as irrelevant costs and sunk costs. how would you use differential analysis to arrive at this decision? are there any other items that should be considered when making this decision?

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12-10-2017
Business

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Pretend you are again a manager of your favorite manufacturing company. you have been asked to determine whether a product (one of your choosing) should be manufactured in-house or outsourced to another vendor. discuss the relevant costs you would consider for this decision as well as irrelevant costs and sunk costs. how would you use differential analysis to arrive at this decision? are there any other items that should be considered when making this decision?

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W0lf93 W0lf93 · Answer 1 · 2017-10-21T15:00:31+02:00

When considering if an item should be outsource, or kept in house you need to consider the costs. What is the actual cost of the item to manufacture in house? IE: Materials, Labor, Storage, What is the retail price of the item when you are selling it? Once you have this information you can see what type of profit you are looking at in house. Now you will need to consider if you can save money via outsourcing the product. The manufacturer will give you a cost on what the item will cost to produce on their end, now add in the price to ship that item to your warehouse. From here we can look at what the total cost of the item was, and compare that against our previous Outcost, and you will be able to see your cost analysis and profit margin. Outside factors would include; Material quality / Ability to drop ship /