Sales volume = 25,000
Option 1: Inhouse production
Fixed Cost = $300,000
Variable Cost = Volume * Unit variable cost = 25000*12.25 = $306,250
Total cost = Fixed Cost + variable Cost = $300,000 + $306,250 = $606,250 --------------1
Option 2: Outsourcing
Total Cost = Cost per item * Volume = 30*25000 = $750,000 ------------------2
Comparing 1 and 2, we conclude that producing in-house in beneficial.
When might Marine International produce in-house or when they might outsource to Baymont? What would be the optimal decision in this case and why? Confirm your decision by then calculating Total Cost (TC) calculations. Do the TC calculations support your initial decision based upon the Q* calculation? If not, why not? Finally and ignoring the numbers already considered, let’s say the Q vrs Q* are about even. Now what? Please support your position with the optimal number outputs. Please use the outsourcing tools in your to resolve the all of this. Defend you decisions and please show all work (simply cut and paste your work into the response area) and discuss in depth, your solutions and potential outcomes. Make sure you not only produce numbers for all parts here, you discuss the outcomes and the like. This is a very involved outsourcing problem.