outsourcing

Mannaesi

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

Mannaesi

and there is the b)discuss which of the following product should be outsourced and impact of outsourcing it

BethCuthbert

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 ?

Arran

Where have the figures for "unit variable cost for producing in house"come from?

Mannaesi

@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?@Arran@Bethcuthbert as i also struggling with the same question

Mannaesi

@Pian32 @CornishPixie can you please help us,,,dont you have any idea here?

CornishPixie

Hi Mannaesi. Can you please post the exact question so that I can have a look at it tomorrow.

Pian32

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.

Mannaesi

@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

Mannaesi

@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

Mannaesi

@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

CornishPixie

I still don't see the attachment Mannaesi.

Mannaesi

@CornishPixie its here

Mannaesi

@CornishPixie can you give me your email address so i attach it

Mannaesi

@CornishPixie can you give me your email address so i attach it

Mannaesi

@Bran278 please help us here bro

Pian32

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)

Mannaesi

@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)

Mannaesi

@Pian32
A B C
UNIT VARIABLE OF PRODUCING IN HOUSE 14 17 7
UNIT VARIABLE COST OF OUTSOURCING 12 21 10
ANNUAL EXTRA VARIABLE COST/(SAVING) (2000)8000 12000
ANNUAL EXTRA FIXED COST/(SAVINGS ) (1000)5000 6000
TOTAL EXTRA ANNUAL COST/(SAVINGS) (3000)13000 18000

Bro please correct me if i went wrong anywhere still wanna be sure of this question as i had it on my last exam

homsharma19

So, unit variable cost of producing in house -A £15 B £19.50 C £8.50 what this got to do with questions? what this means? if they are not being used?

homsharma19

Sorry, i'm not being clear with these no. can someone answer it pls? why these figures are in the question?

Pian32

The reason for the figures is for the analysis you do later in the question.