A company currently produces an electric motor at its main manufacturing facilit
ID: 2476348 • Letter: A
Question
A company currently produces an electric motor at its main manufacturing facility in Dayton, Ohio. The motor's cost when produced at the Dayton plant is $138.82 per motor. The company is currently considering outsourcing production to either a plant in Mexico or a plant in Indonesia. The company believes that producing the motor in Mexico will result in additional overhead of 15% of the motor's cost to produce it in Dayton. Furthermore, for motors produced in Mexico, the need for additional inventory will probably add $3.82 to each motor's cost, and lower quality will probably cost approximately $1.66. Shipping from Mexico will increase cost by $4.95 per motor. The cost of the motor produced in Mexico will be $92.64. If the motor is produced in Indonesia it will cost $78.59. The company estimates that the shipping cost from Indonesia will be $5.64 per motor, and the costs of additional inventory and lower quality are estimated at $3.88 and $4.53. respectively. The additional overhead is estimated to be 15% of the motor's production cost in Dayton. Conduct a total cost of outsourcing for this item. The total cost of outsourcing to Mexico is $.(Enter your response rounded to two decimal places.)Explanation / Answer
mexico
Additional overheads (138.82*15%)
20.823
Need for additional inventory cost
3.82
lower quality
1.66
Shipping cost
4.95
production cost
92.64
123.893
Indonesia
cost
78.59
Shipping cost
5.64
Need for additional inventory cost
3.88
lower quality
4.53
Additional overheads (138.82*15%)
20.823
113.463
mexico
Additional overheads (138.82*15%)
20.823
Need for additional inventory cost
3.82
lower quality
1.66
Shipping cost
4.95
production cost
92.64
123.893
Indonesia
cost
78.59
Shipping cost
5.64
Need for additional inventory cost
3.88
lower quality
4.53
Additional overheads (138.82*15%)
20.823
113.463
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