Question

9. Assume that Cane expects to produce and sell 97,000 Alphas during the current year. A supplier has offered to manufacture and deliver 97,000 Alphas to Cane for a price of $148 per unit. What is the financial advantage (disadvantage) of buying 97,000 units from the supplier instead of making those units

Answer 1

It is sort of outsourcing exercise which is executed as a cost controlling measure thereby enabling management to focus on critical matters.

Explanation:

Here, if in the given case CANE outsources manufacturing activity to an established supplier it can save on hiring factory and cost and lab our overheads and can effectively focus on more critical functions including sales and strengthening supply chain management .

They can effectively deploy capital to more productive options.

This process if considered after due diligence will enable it to improve its financial position.

It only needs to ensure that supplier is committed to service, quality and delivery with flexibility so that financial benefits syncs with the set of expectations.