Total annual cost for in sourcing and outsourcing the pumps

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Reference no: EM131791066

The supply manager at a dishwasher manufacturer is assessing the company should purchase the pump from a supplier or assemble the pump in-house. Forecasts suggest that 15,000 pumps are needed per year. The annual fixed costs to assemble the pumps are $120,000 per year. The variable costs per unit to assemble the pump are $25/unit. The pumps can be purchased for $30/unit.

a. Compute the total annual cost for in sourcing and outsourcing the pumps.

b. Which option would you prefer?

Insource

Outsource

Reference no: EM131791066

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