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outsourcing

evening, i kindly need your help good people on the outsourcing question..........i have attached the question

Comments

  • MannaesiMannaesi Registered Posts: 55
    and there is the b)discuss which of the following product should be outsourced and impact of outsourcing it
  • BethCuthbertBethCuthbert Registered Posts: 1
    Hi, Sorry I’m not able to help answer your question as I’m struggling myself but does anyone have any examples of the same type of question for me to practise please, this came up in my exam and I haven’t seen a question like it before in my (Kaplan) revision material ?
  • ArranArran Registered Posts: 2
    Where have the figures for "unit variable cost for producing in house"come from?
  • MannaesiMannaesi Registered Posts: 55
    @BethCuthbert hy,,,,,,,,unfortunately i dont have similar question got it from a friend


    you guys are doing selfstudy?cant you take it to your tutors?@[email protected] as i also struggling with the same question
  • MannaesiMannaesi Registered Posts: 55
    @Pian32 @CornishPixie can you please help us,,,dont you have any idea here?
  • CornishPixieCornishPixie Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 116
    Hi Mannaesi. Can you please post the exact question so that I can have a look at it tomorrow.
  • Pian32Pian32 Registered Posts: 144
    So the extra variable cost/savings is the difference between outsourcing and doing it in house. So for variable savings A have a unit saving of £2, B a cost of £6 and C a cost of £3. Scale this up for number of units. A saves £2000, B costs £12,000 and C costs £12,000

    All the attributable fixed costs are saved but the committed costs aren't.

    A saves £1000 B saves £3000 and C saves £6000

    Total
    A saves £3000, B costs £9000 and C costs £6000


    So for part b) A is the only one that could be considered worth outsourcing financially. Impacts could include job losses for locals, there could be overlap in production which would be affected or machines that you have that are no longer useful etc

    Hopefully this helps. To make it clear the £30,000 are costs regardless of how something is done. Such as rental costs which you'd have to pay anyway so there's no saving or cost to outsourcing the work.
    AAT Level 4, MAAT
    CornishPixie
  • MannaesiMannaesi Registered Posts: 55
    @CornishPixie i just attached it again

    @Pian32 can you please do it in table form and attach your workings please i cant get the cost of variable cost per unit saving of 6pound for product b as i got a cost of 4

  • MannaesiMannaesi Registered Posts: 55
    @CornishPixie i just attached it again

    @Pian32 can you please do it in table form and attach your workings please i cant get the cost of variable cost per unit saving of 6pound for product b as i got a cost of 4

  • MannaesiMannaesi Registered Posts: 55
    @CornishPixie i attached it again

    @Pian32 can you please do it in table form and attach your workings please i cant get the cost of variable cost per unit saving of 6pound for product b as i got a cost of 4

  • CornishPixieCornishPixie Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 116
    I still don't see the attachment Mannaesi.
  • MannaesiMannaesi Registered Posts: 55
    @CornishPixie its here
  • MannaesiMannaesi Registered Posts: 55
    @CornishPixie can you give me your email address so i attach it
  • MannaesiMannaesi Registered Posts: 55
    @CornishPixie can you give me your email address so i attach it
  • MannaesiMannaesi Registered Posts: 55
    @Bran278 please help us here bro
  • Pian32Pian32 Registered Posts: 144
    edited February 10
    Pian32 said:

    So the extra variable cost/savings is the difference between outsourcing and doing it in house. So for variable savings A have a unit saving of £2, B a cost of £6 and C a cost of £3. Scale this up for number of units. A saves £2000, B costs £12,000 and C costs £12,000

    All the attributable fixed costs are saved but the committed costs aren't.

    A saves £1000 B saves £3000 and C saves £6000

    Total
    A saves £3000, B costs £9000 and C costs £6000


    So for part b) A is the only one that could be considered worth outsourcing financially. Impacts could include job losses for locals, there could be overlap in production which would be affected or machines that you have that are no longer useful etc

    Hopefully this helps. To make it clear the £30,000 are costs regardless of how something is done. Such as rental costs which you'd have to pay anyway so there's no saving or cost to outsourcing the work.

    Hi Mannasai you're correct the cost saving is 4. On my screen the picture looked like the original variable cost for B was 1 not 3 and the fixed cost has the same issue. This obviously needs to be carried forward:

    Original Variable Costs:
    A - £14
    B- £17 (My earlier workings had it as £15)
    C - £7

    Variable Savings/(cost):
    A - £2 (14-12)
    B - £(4) (17-21)
    C - £(3) (7-10)

    Scale up:
    A = 1000*2 = £2000
    B = 2000* (4) = £(8000)
    C = 4000 * (3) = £(12000)

    Saved Fixed:
    A = £1000
    B= £5000
    C= £6000

    Total:
    A = £3000
    B = £(3000)
    C = £(6000)
    AAT Level 4, MAAT
    CornishPixie
  • MannaesiMannaesi Registered Posts: 55
    @Pian32 by the way if you were to write a report based on your calculations about which product should be outsourced,wat will you write?

    Discuss which product should be outsourced>(12MARKS)
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