Make or Buy Analysis

“Make” or to “Buy” will influence the efficiencies of operation in a positive manner. The main reason behind it is that, the make or buy decisions are helpful to sustain business practices, and to improve efficiency in operations in an effective manner.

Breakeven Analysis for Product Tylenol Approach 1 - Same price as Tylenol Approach 2a - Cheaper than Tylenol Approach 2b - Cheaper w/lowered trade cost $ $ $ $ Unit Cost (Variable Cost) 0.60 0.60 0.60 0.60 Trade Cost (Selling Price to Retailers) $ 1.69 $ 1.69 $ 1.05 $ 0.70 Fixed Cost (Advertising) 2,000,000 6,000,000 6,000,000 6,000,000 Break-Even Quantity [Fixed Cost/(Trade Cost-Unit Cost)] 1,834,862 5,504,587 13,333,333 60,000,000 Contribution Margin (Unit) 64% 64% 43% 14%

Incremental cost is the cost associated with increasing production by one unit, in this case sending Tashtego on a round trip. It represents the added costs that would not exist if the round trip was not made.

Although the financial goal is to create profit, we need to calculate the breakeven point to get started.

Only the incremental costs and benefits are relevant. In particular, only the variable manufacturing overhead and the cost of the special tool are relevant overhead costs in this situation. The other manufacturing overhead costs are fixed and are not affected by the decision.

If more is produced when it comes to the budget, the fixed cost would be favorable. I believe that the each unit would lower cost when it comes to production in units. But since the total fixed overhead is extended over a huge amount of units, this will cause a lower production in unit. Lastly, it will increase the

Above all the drama and the controversies that had happened in Show Me The Money 4 so far, hearing Mino say this is what really got to me. This boy worked so very hard, skipped meals and lost sleep to write lyrics that people, especially his fans, wouldn’t even get to hear. Do you know how frustrating it is to give your all on something and just have your efforts wasted? And to think that Mino has to go through all of this already with the stress of being ruthlessly criticized by the public for a line of rap that he didn’t even mean hurts me even more. He’s been used for ratings and publicity, has been a victim of careless editing, has been and is still the target of most other contestants on the show and yet he never acted up or complained.

According to this method, every unit of the product is assigned all direct, fixed, and variable costs. This method includes the cost of direct materials and labor as well as a portion of the overhead costs associated with it in the final costing of every unit of the product.

This ratio plays an imperative role in representing the portion of the firm’s sales revenue that is not consumed or utilized by the variable costs hence contributes to the coverage of the firms fixed costs. Nonetheless, understanding the break-even point analysis is very important for the organizational managers (Gapenski, 2012). First, the point occurs as an indicator that the firm can effectively meet its expenses as the expenses equals the firms sales revenue realized in total. This assertion leads to a fundamental interplay between the fixed costs as well as the variable

All the costs by a company can be broken into two categories, fixed costs and variable costs. Costs that are independent of output are called fixed costs. Fixed costs remain constant throughout the relevant range and are usually considered sunk for the relevant range. Buildings and machinery are included inputs that cannot be adjusted in the short term. They are only fixed in relation to the quantity of production for a certain time period. The cost of all inputs is variable, in the long run.

Before performing the CVP analysis for the Hampshire manufacturing firm, we identify two basic cost classifications of interest comprising variable costs and fixed costs. As we analyze the case in study, we need to initially acknowledge that both variable costs per

The make-or-buy analysis is the decision to choose between manufacturing a product in-house or by purchasing it from an external supplier (PMBOK, 2013). This is also referred to as outsourcing and is a decision that must be made based on several factors. Per the Project Management Body of Knowledge, expenses for manufacturing must include additional costs, such as labor to manufacture the items and disposal costs of existing equipment. Conversely, the decision to outsource a product or service, must include additional shipping costs, import fees and taxes, not to mention the cost of storing and inventory management. Furthermore, there are also other decision-making factors, such as the need for control over quality, proprietary technology, time constraints, and lack of expertise or limited capabilities (PMBOK, 2013).

The act of choosing between manufacturing a product in-house or purchasing it from an external supplier. In a make-or-buy decision, the two most important factors to consider are cost and availability of production capacity.

The fixed cost in the form of fixed factors i.e., plant, machinery, building, etc. does not vary with the change in the output of the firm. If the firm is to increase or decrease its output, the change only takes place in the quantity of variable resources such as labor, raw material, etc.

In the simplest term, total cost is all the costs incurred in the production of a product or the engagement of an activity. Total costs are calculated through adding together the total fixed costs and the total variable costs. Variable costs are costs that change based on the amount of goods bought or the amount of services used. Fixed costs are costs that don’t change each month due to having no relationship with the amount of products produced.