Business, 18.06.2020 05:57 danielle413

Large global automobile manufacturer is considering outsourcing the manufacturing of a solenoid used in the transmission of its SUVs. The company estimates that annual fixed costs of manufacturing the part in-house, which include equipment, maintenance, and management, amounts to $7.1 million. The variable costs of labor and material are $8.00 per unit. The company has an offer from a major subcontractor to produce the part for $10.75 per unit. However, the subcontractor wants the company to share in the costs of the equipment. The automobile company estimates that the total cost would be $ 3.7 million, which also includes management oversight for the new supply contact. A. How many solenoids would the automobile company need per year to make the in-house option least costly?
B. What other factors, besides costs, should the automobile company consider before revising its supply chain for SUVs?

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