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Outsourcing (Make or Buy / Offshoring) Decision Are the incremental costs of making the product more or less than the incremental costs of outsourcing? DM DL The Flat World Company has the following information: $ 4,000,000 $ 2,000,000 $ 500,000 VMOH FMOH $3,000,000 $ 9,500,000 Production vol Buy offer Unit cost ozbiex quo 1200 inevalon 50,000 $140.00 noizbod snij joubo19 6 (go10 10 ) ninos. tudio avilizoq sabivorq bubong sdi as Jedi 21203 boxil yos pisdi As fuborg erit gniunitnoszib Eynegolo3 qo12 rissT= A company offers to make 50,000 units for $140 per unit. 1) Using baseline assumptions (i.e. all fixed costs are unavoidable), should the Flat World Company make or buy its product? Make 2) Assume that the Flat World can avoid $1,000,000 of fixed costs by outsourcing. It also now needs 60,000 units instead of the 50,000 units. 3) Given the information in #2, what is the most that the Flat World Company should be willing to pay to have a company produce a unit of the product?

Outsourcing (Make or Buy / Offshoring) Decision Are the incremental costs of making the product more or less than the incremental costs of outsourcing? The Flat World Company has the following information: A company offers to make 50,000 units for $140 per unit. 1) Using baseline assumptions (i.e. all fixed costs are unavoidable), should the Flat World Company make or buy its product? 2) Assume that the Flat World can avoid $1,000,000 of fixed costs by outsourcing. It also now needs 60,000 units instead of the 50,000 units. 3) Given the information in #2, what is the most that the Flat World Company should be willing to pay to have a company produce a unit of the product

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