PSM Case 5-1 Garland Chocolates

Write the 10-year cashflow spreadsheets for outsourcing by using the excel.

Please only use explicit information provided in the case. For example, when the case states "annual maintenance cost...expected to increase by at least 25 percent in the next 12 months", you can assume that the cost will increase exactly 25% for the next year and remain at this level for future years.

Exhibit 1 lists the standard costs, rather than actual costs, of current operations. Exhibit 2 shows that the actual scrap rates deviate from the standard scrap rates. The standard material costs are based on the standard scrap rate rather than the deteriorated actual scrap rate. There fore you need to adjust the standard material costs based on the standard and actual scrap rates to calculate the actual costs. The labor costs do not need to be adjusted.

For the outsourcing option, the case states "it would need six months to ramp up production", therefore you should assume the outsourcing options takes effect in year 1 rather than 0. You may also make the assumption that the outsourcing option uses new packaging lines and thus enjoys the 20% increase in sales.

Garland Chocolates Chapter 5 Maie a 8ig, trapurting ind fututming 127 EXHIBIT 2 Manafactariags and Paiking Line Perfermance Statisfics manufacturing line was close to the target of 80 per- that it would need six months to ramp up production of Edgecent, it was also showing signs of deterioration. The ef- worth Toffee. ficiency rate had declined to 76 percent, compared to more than 90 percent five years prior, and it had become THE TEAN MEETING increasingly more difficult to find replacement parts