Reference no: EM132565610

Barber Manufacturing currently makes 2,000 units of gas-powered leaf blowers each year. However, the company has found a manufacturing company that can provide the blowers at a price of $14 each. The company is considering purchasing the blowers. If the company purchases the blower, the machine can be used to produce 5,000 units of another product that would generate a contribution of $2 per unit. There will be no need of supervisor if Barber goes for outsourcing. Barber's standard cost for a blower is listed below.

Direct Material.................................................................. $4

Direct labor....................................................................... 2

Variable cost..................................................................... 3

Fixed Cost

Depreciation .......................................................................3

CEO's Salary.....................................................................2

Supervisor's salary (directly connected with blower) .................... 4

Cost per unit $18

Required:

Question 1: Should Barber purchase the blower outside or make it at his own.

Question 2: List five ways that management can seek to relax a constraint by expanding the capacity of a bottleneck operation.