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anyanavicka [17]
3 years ago
6

The Doright Door Company is considering outsourcing production of its door to Mexico. Use the weighted scoring method to evaluat

e the costs and risks of the offshore supplier, Perfect Door Company (Puertas Perfectos). The Mexican company has quoted a price of $83.00 for a standard door in order quantities of 5000 units that will fill demand for a year. The doors can be transported in a semi that holds 250 doors and costs $825 to make the trip from Mexico to the Doright warehouse. It will cost $5,000 to send engineers to prequalify the plant and $1,000 to negotiate and administer the contract. The inventory is carried for an average of 6 months during the year with a 20 percent carrying charge. The company has been producing the doors for $119 in the U.S. The weights and ratings for the order are as follows.

Business
1 answer:
Gekata [30.6K]3 years ago
6 0

Answer:

(A) Mexican supplier cost = $445,800 or $89.16 average cost.

In-house cost = $714,000 or $142.8

(B) Mexican supplier total weighted score = 0.265 or 22.43%

In-house supplier weighted score= 0.238 or 23.8%

(C) Yes, explaination below

Explanation:

Mexican Supplier cost breakdown:

Quota price $83 X 5000 = $415, 000

Transport cost

1. to transport 5000 doors would require making a total of 20 trips from Mexico to USA (5000/250 doors)

2. at a cost of $825 per trip, total cost to transport doors is = $16,500.

Sending Engineers costs and Negotiation cost =

$5000 + $1000

(Transport+Sending Engineers cost) =

$22,500

Inventory carrying cost= 20% of cost of storing the goods. (total of all other cost) 20% x 22500 = $8300

Total cost = $445,800 or $89.16 average cost.

Total weighted score average:

Using the formula;

Weight= score x rating

Score = Weight/rating (making score subject of the formula)

Mexican Weighted

score1= 16%/3 = 0.0533, + 0.12 score2, + 0.035 + score3, + 0.056 + score4. = 0.265.

American weighted score

Using same formula;

0.04 score1, + 0.15 score2, + 0.014 score3, + 0.034 score 4 = 0.238.

The company should outsource the product. Why? because it will reduce total cost of doors, making them cheaper for if they do so, resulting in higher profit.

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