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Susan Gilbert, a purchasing agent for Wisconsin Plastic Inc (WSI) is reviewing quotations from suppliers for a new plastic gear. Susan plans to either place an order for 12000 years from a supplier with the least cost quotation or recommend that WSI purchase the necessary equipment and make the gear itself.
Relevant data for this make-or-buy decision are found below-
Make Buy
Fixed Cost of Equipment $60000 0
Variable cost per part $16 $20
What should Susan recommend? Make or Buy? Why? Choose one.
What should Susan recommend if the order size is increased by 25%? Make or Buy? Why?
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The key points in Chapter 12 (Chapter 13) tell us that good inventory management is important for successful organizations. The key issues are when to order and how much to order.
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