Assess information relevant to an outsourcing decision (Learning Objective 7)

Shyhrete Berisha is the founder and sole owner of Berisha. Analysts have estimated that his chain of home improvement stores scattered throughout the provinces and territories generate about $3 billion in annual sales. But how can Berisha compete with giant Home Depot?

Suppose Berisha is trying to decide whether to invest $45 million in a state-of-the-art manufacturing plant in the Okanagan. Berisha expects the plant would operate for 15 years, after which it would have no residual value. The plant would produce Berisha's own line of formica countertops, cabinets, and picnic tables.

Suppose Berisha incurred the following unit costs in producing its own product lines:

Per Unit Countertops Cabinets Picnic Tables Direct materials $15 $10 $25 Direct labour 10 5 15 Variable manufacturing overhead 5 2 6