– 10% reduction in merchandise inv.
Net total assets
$7,750,000
Old total assets
SELECTED BALANCE SHEET ITEMS
Merchandise inventory
Total assets
Sales
$50,000,000
Cost of goods sold (COGS)
$30,000,000
Pretax earnings
EARNINGS AND EXPENSES (YEAR ENDING JANUARY 2012)
SELECTED BALANCE SHEET ITEMS
New merchandise inventory
$2,250,000
Old Pretax earnings
+ 10% reduction in COGS
New pretax earnings
$8,000,000
EARNINGS AND EXPENSES (YEAR ENDING JANUARY 2012)
Sales
$50,000,000
EARNINGS AND EXPENSES (YEAR ENDING JANUARY 2012)
SELECTED BALANCE SHEET ITEMS
$50,000,000
$30,000,000
Sales
Cost of goods sold (COGS)
Pretax earnings
Merchandise inventory
Total assets
PERFORMANCE
DIMENSION
IMPORTANCE
BEVERLY HILLS
INC.
CONAN THE
ELECTRICIAN
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
b.)
INSOURCING — Volume increases to 1.5 million units
Operating Expenses
Direct Labor $0.0300
Benefits $0.0150 50%
c.)
Total cost per unit $0.1815
a.)
GRANVILLE MAINTENANCE BUDGET – 2009
Assumptions: 4 workers
1 supervisor
INSOURCING OPTION
Direct expenses (per worker)
Wages $120,000 $2,500
per worker, per month
OUTSOURCING OPTION
b.)
Besides cost, Granville may also want to consider the quality of the maintenance provided and the
a.)
PERFORMANCE
DIMENSION
IMPORTANCE ALTREX TGI LTD. PC ASSOCIATES
Reputation 0.2 3 4 5
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.)
POTENTIAL SOURCES
If the weights for price, quality, and delivery were changed to .6, .2, .2 respectively, carrier C
If Carrier B has the capacity to handle all of Flynn’s business, then Flynn might consider single-
Weighted-Point Evaluation System
PERFORMANCE
DIMENSION
IMPORTANCE X1 X2 X3 X4
B0.30 2 4 3 2
D0.20 4 3 2 1
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
Total cost for year $1,900,000
Total Savings $1,138,000
OUTSOURCING OPTION
Fixed Cost:
Administrative and IT Costs $1,500,000
Question 2.)
Question 3.)
Question 4.)
Service measures that should be put in place include a quality metric of contacts resolved on first
The option to outsource the technical support center is cheaper by more than $1 million.
choosing a poor supplier and of losing control of their customer contacts are too great.
I believe that Pagoda should not outsource its online help desk. As they are not competing in the low-
amount of training the agents will require, and the cost of managing an offshore partner. I would weight
Other factors to consider, besides cost, include the quality of support offered, the speed to answer
Total cost for year $3,038,000