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Make vs Buy - Case Study Example
Finance & Accounting
Pages 3 (753 words)
Make vs. Buy decision Grade Course (24th, Jan. 2013) Make vs. Buy decision Question a: There are four alternatives that are open for available to Liquid Chemical. The first alternative would be that of allowing everything to remain as it is without changing anything…
The advantage of this alternative is that no extra cost will be incurred and no further business interruption and inconveniencies will be experienced. The disadvantage is that there are no chances of reducing the costs involved. Alternative B: Outsourcing maintenance services Liquid Chemical continues to produce the packaging containers but outsource the costs of maintenance from Packages, Inc. this alternative will have the effect of maintaining all the other costs that are applicable in the container department, with an exception of the maintenance costs. However, Liquid Chemical will have to factor in the difference is the maintenance costs, considering that the maintenance costs incurred by the company while doings its maintenance will differ from the cost charged by Packages, Inc. to do the same work. The costs applicable for Alternative B include: Cost of materials= $700,000 Cost of labor=$ 500,000 Overhead costs=$468,500 Administrative overheads=$225,000 Total costs=$1,893,500 Add the cost of maintenance charges by Packages, Inc. ...
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