Make or Buy Decision for Quincy Inc.
Should Quincy make or buy the ice cream units? Explain your decision.
1. Should Quincy make or buy the ice cream units?
2. Calculate the maximum amount Quincy should pay for the ice cream units.
3. Should Quincy make or buy the ice cream units if sales projections increase to 125,000 boxes?
4. Would it be better for Quincy to make the first 100,000 ice cream units and buy the remainder if sales projections increase to 125,000 boxes?
5. List qualitative factors Quincy should consider when determining whether it should make or buy the ice cream units.
1. Should Quincy make or buy the ice cream units? Explain your decision.
Quincy should buy the ice cream units from the dairy company for cost savings. By purchasing the units, direct labor and variable overhead costs would be reduced by 10%, and the direct material costs would be 20% lower. This would help lower the overall production cost for Quincy.
2. Calculate the maximum amount Quincy should pay for the ice cream units.
The maximum price Quincy should pay for the ice cream units is $0.90 for 24 units. This is the price offered by the dairy company, and paying more would eliminate the cost advantage of buying the units.
3. Should Quincy make or buy the ice cream units if sales projections increase to 125,000 boxes?
If sales projections are revised to 125,000 boxes, Quincy should still make the 125,000 ice cream units. The increased volume of sales justifies the investment in the new machine, and the cost savings from making the units outweigh the leasing cost.
4. Would it be better for Quincy to make the first 100,000 ice cream units and buy the remainder if sales projections increase to 125,000 boxes?
If sales projections are revised to 125,000 boxes and leasing a machine is required, it would be better for Quincy to make the ice cream for the first 100,000 boxes and buy the remainder from the dairy company. This approach ensures efficient utilization of existing resources while still taking advantage of the cost savings from buying the units.
5. List qualitative factors Quincy should consider when determining whether it should make or buy the ice cream units.
Qualitative factors Quincy should consider include the quality and consistency of the ice cream units, the reputation and reliability of the dairy company, and the impact on overall production efficiency and customer satisfaction.
1. Quincy should buy the ice cream units from the dairy company for cost savings. By purchasing the units, direct labor and variable overhead costs would be reduced by 10%, and the direct material costs would be 20% lower. This would help lower the overall production cost for Quincy.
2. The maximum price Quincy should pay for the ice cream units is $0.90 for 24 units. This is the price offered by the dairy company, and paying more would eliminate the cost advantage of buying the units.
3. If sales projections are revised to 125,000 boxes, Quincy should still make the 125,000 ice cream units. The increased volume of sales justifies the investment in the new machine, and the cost savings from making the units outweigh the leasing cost.
4. If sales projections are revised to 125,000 boxes and leasing a machine is required, it would be better for Quincy to make the ice cream for the first 100,000 boxes and buy the remainder from the dairy company. This approach ensures efficient utilization of existing resources while still taking advantage of the cost savings from buying the units.
5. Qualitative factors Quincy should consider include the quality and consistency of the ice cream units, the reputation and reliability of the dairy company, and the impact on overall production efficiency and customer satisfaction.