Makes sense to outsource the purchasing function

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Reference no: EM131553957

Henri of Henri’s French Cuisine (HFC), a chain of 12 restaurants, is trying to decide if it makes sense to outsource the purchasing function. Currently, Henri employs two buyers at an annual fixed cost of $85,000. Henri estimates that the variable cost of each purchase order placed is $15. Value-Buy (VB), a group of purchasing specialists, will perform the purchasing function for a fixed annual fee of $100,000 plus $5 for each purchase order placed. Last year, HFC placed 1450 purchase orders. a) What was the cost last year to HFC when doing the purchasing in-house? b) What would the cost have been last year had HFC used Value-Buy? c) What is the indifference point for the two alternatives? d) If HFC estimates it will place 1600 purchase orders next year, should it use VB?

Reference no: EM131553957

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