Drew Insert Data File Page Layout View Review Formulas Home Help AX 29 Wiap Text General Calibri 18 A A 9-10-A- Paste $ - % -98 BTU Merge & Center Conditional Forma Formatting Table Styles Number Alignment Font Clipboard A3 & M N A B D G 1 Q5. MAKE VS BUY 2 Maple Garden Produts (MGP) currently purchases BBQ sauce from an external supplier but is thinking about bringing it in-house. 3 4 Currently, MGP acquires 500 barrels (100,000 gallons) of BBQ sauce on a monthly basis. 5 Each barrel of BBQ sauce cost $64 per barrel. 6 Transportation costs were paid by MGP and were $8 per barrel 7 MGP ran 24 hours a day for five days a week (each day had three separate eight-hour shifts). 8 The average worker wage was 520/per HR. 9 Workers take an average of 10 minutes to handle eah barrel (including sanitation, adding other componets, etc.) 10 Additoinal procurement costs (including overhead) were $0.02 per gallon 11 12 i MGP were to instead produce the product internally, the following would occur 13 The mix would be 60% ketchup, 20% mayo, and 20% water. Ketchup would cost $0.15 per gallon, including freight. 15 Mayo costs 50.1875 per gation but is delivered in 15,000 gallon quantities. 16 Water would only cost $0.025 per gallon 17 The production department believes the change to in-house would not require any incremental workers However, producing in-house would take up more of the current staff's time. 19 It is estimated that moving in-house would lead to total other costs (DL and MOH) of approximately $0.105 per gallon of BBQ sauce. 20 This was under an assumption of standard costing 21. Should MGP make or buy the product? 22 23 24 25 18 27 28 04 05 06