– 10% reduction in merchandise inv.
Net total assets
$7,750,000
Total assets
$8,000,000
$2,500,000
Sales
Cost of goods sold (COGS)
Pretax earnings
$50,000,000
$30,000,000
$5,000,000
Merchandise inventory
EARNINGS AND EXPENSES (YEAR ENDING JANUARY 2019)
SELECTED BALANCE SHEET ITEMS
EARNINGS AND EXPENSES (YEAR ENDING JANUARY 2019)
Sales
$50,000,000
New Cost of goods sold (COGS)
$27,000,000
Old Pretax earnings
$5,000,000
+ 10% reduction in COGS
$3,000,000
New pretax earnings
$8,000,000
SELECTED BALANCE SHEET ITEMS
New merchandise inventory
$2,250,000
Old total assets
$8,000,000
EARNINGS AND EXPENSES (YEAR ENDING JANUARY 2019)
Sales
$50,000,000
Cost of goods sold (COGS)
$30,000,000
Pretax earnings
$5,000,000
SELECTED BALANCE SHEET ITEMS
Merchandise inventory
$2,500,000
$8,000,000
Total assets
PERFORMANCE
DIMENSION
IMPORTANCE
BEVERLY HILLS
INC.
CONAN THE
ELECTRICIAN
Price 0.3 4 3 5
Based on the new results, Electra should change its supplier to Conan the Electrician, as it has
POTENTIAL SOURCES
Total Cost Analysis for the Sourcing Decision at ABC
INSOURCING OPTION
Operating Expenses
Direct Labor $0.0300
Benefits $0.0150 50% of Direct Labor
Direct Material $0.0500
OUTSOURCING OPTION 1
Purchase Price $0.1000
Shipping and handling $0.0100
a.)
OUTSOURCING — New supplier
Purchase Price $0.0800
Shipping and handling $0.0150
The difference in cost per unit is explained by the larger volume absorbing the fixed “equipment
b.)
INSOURCING — Volume increases to 1.5 million units
Operating Expenses
Direct Labor $0.0300
Benefits $0.0150 50%
c.)
Other factors, besides cost, that should be considered by ABC when deciding whether or not to
a.)
GRANVILLE MAINTENANCE BUDGET – 2020
Assumptions: 4 workers
1 supervisor
INSOURCING OPTION
Direct expenses (per worker)
Wages $120,000 $2,500
per worker, per month
OUTSOURCING OPTION
Maintenance contract $300,000
Total cost for year $300,000
Total Savings $14,400
b.)
Besides cost, Granville may also want to consider the quality of the maintenance provided and the
schools’ responsibility to support its community, which may mean keeping the current employees even
per worker, per month
Total cost for year $314,400
a.)
PERFORMANCE
DIMENSION
IMPORTANCE ALTREX TGI LTD. PC ASSOCIATES
b.)
POTENTIAL SOURCES
To incorporate the concept of order qualifiers into the weighted-point evaluation system, you
a.)
PERFORMANCE
DIMENSION
IMPORTANCE CARRIER A CARRIER B CARRIER C
Price 0.2 3 2 5
b.)
c.)
Carrier B is best according to the weighted-point evaluation system.
POTENTIAL SOURCES
If the weights for price, quality, and delivery were changed to .6, .2, .2 respectively, carrier C
Weighted-Point Evaluation System
PERFORMANCE
DIMENSION
IMPORTANCE X1 X2 X3 X4
POTENTIAL SOURCES
Question 1.)
Total Cost Analysis for the Sourcing Decision at Pagoda
Assumptions: 40 workers
3 supervisor
800,000 support contacts per year
INSOURCING OPTION
Personnel Cost:
Wages $1,600,000 $40,000 per worker
Total cost for year $1,900,000
Total Savings $1,138,000
OUTSOURCING (New Delhi) OPTION
Fixed Cost:
Administrative and IT Costs $1,500,000
Question 2.)
Question 3.)
Question 4.)
(not having to open a second contact for the same issue later), a time metric around the speed of
Service measures that should be put in place include a quality metric of contacts resolved on first contact
I believe that Pagoda should not outsource its online help desk. As they are not competing in the low-
cost area of the market, they should stay focused on their core-competencies of quality and
Other factors to consider, besides cost, include the quality of support offered, the speed to answer
requests, the percentage of downtime the vendor might experience due to connectivity issues, the
Total cost for year $3,038,000