QUESTION #3 - Leaming Curve Primo Caf is thinking about outsourcing production of the Bean Boiler. Currently, the cost of producing the Bean Boiler in-house is $13 per unit Primo has been producing the Bean Boiler for many years, and, for the past 2 years, cost reduction has been virtually zero. You have found a supplier - Legit DofELLT who can produce the Bean Boiler at $13.31 per unit Legit Mfe has the capacity to produce the Bean Boilet in large volumes (30,000 units per production run). Primo Caf sells about 300,000 Bean Boilers per year -- so your plan is to buy 10 productions runs/year from legit Mfg. Legit Mfg quotes you a contract price of $3,950,000 for 300,000 units based on the following cost information. DM DL Legit Manufacturing LLC S 6.00 S 2.00 $ 3.00 150% OH COGS $ 11.00 1.10 SG&A S 10% TO $ 12.10 Profit $ 121 10% Sell Price $ 13:31 You know that Legit Mife will have to retrain their employees to accommodate production of the Bean Boiler as well as retool some of their existing machinery. But having seen the Bean Boiler produced in- house - you also know that once employees learn the new process, production becomes relatively standardized after the first run. Based on this knowledge, you believe that Legit Mig's cost model needs to reflect an 88% learning curve. Apply a learning curve as presented in class to complete the question below. Complete all calculations in the excel file that you will upload with your exam, 1. Marco wants a recommendation on what Prima Cafe should do. Given the information above- and what you know about the product you are sourcing - what would you recommend? Why? You work as a supply chain manager for Primo Caf Inc. Primo Caf is a small-sized monufacturer of stylish coffee makers. The company has three distinct coffee makers that it produces. The Bean Boiler is Primo Caf's most basic model. The main materials used in manufacturing the Bean Boiler are aluminum and plastic. There are lots of suppliers for these materials. At present, Primo Caf's total cost for producing a Bean Boiler is $13 per unit and the product is competitively priced at $20 per unit. There are lots of other coffee makers that are very similar to the Bean Boiler on the market. Still, sales of the Bean Boiler are very stable. The company reliably sells 24,625 to 25,375 units of this product per month. The Family Man is Primo Caf's mid-market offering. Primo Caf manufactures most of the Family Man in-house, but buys the glass pot and the electronics that control the on/off function and the timer. At present, final assembly of the in- house manufactured parts and the purchased sub-components occurs at Primo Caf's facility in Grand Rapids. Total cost for producing the Family Man is currently $32 per unit and each unit is sold for $34.99. The Family Man's sleek, artistic design and range of unique colors helps to distinguish it from a wide selection of similar products offered by competitors. Prices for direct competitors range from $25 to $45. Sales of the Family Man range from 19,400 to 20,600 units per month. The Saffissimg is Primo Caf's high-end offering Primo Caf produces the external casing for the Catfissing in-house, but buys all of the important sub components from external suppliers. The most important sub-components for the Saffissing are the gauges that regulate the temperature and pressure of the water as it is forced through the coffee grounds. The proper working of these gauges ensure that the Sattissimus produces a perfect cup of coffee brewing. The Saffissime's design is a closely held company secret. The machine has won industry awards both in terms of its coffee making process and its external looks. Currently, the Caffissing, costs $375 to produce and sells for $600. Because of the relatively high price and unique design demand for the Caftissing is difficult to predict. Over the past year, demand has ranged from 8,500 to 11 500 units per month. Display Settings D) Focus IG QUESTION #3 - Leaming Curve Primo Caf is thinking about outsourcing production of the Bean Boiler. Currently, the cost of producing the Bean Boiler in-house is $13 per unit Primo has been producing the Bean Boiler for many years, and, for the past 2 years, cost reduction has been virtually zero. You have found a supplier - Legit DofELLT who can produce the Bean Boiler at $13.31 per unit Legit Mfe has the capacity to produce the Bean Boilet in large volumes (30,000 units per production run). Primo Caf sells about 300,000 Bean Boilers per year -- so your plan is to buy 10 productions runs/year from legit Mfg. Legit Mfg quotes you a contract price of $3,950,000 for 300,000 units based on the following cost information. DM DL Legit Manufacturing LLC S 6.00 S 2.00 $ 3.00 150% OH COGS $ 11.00 1.10 SG&A S 10% TO $ 12.10 Profit $ 121 10% Sell Price $ 13:31 You know that Legit Mife will have to retrain their employees to accommodate production of the Bean Boiler as well as retool some of their existing machinery. But having seen the Bean Boiler produced in- house - you also know that once employees learn the new process, production becomes relatively standardized after the first run. Based on this knowledge, you believe that Legit Mig's cost model needs to reflect an 88% learning curve. Apply a learning curve as presented in class to complete the question below. Complete all calculations in the excel file that you will upload with your exam, 1. Marco wants a recommendation on what Prima Cafe should do. Given the information above- and what you know about the product you are sourcing - what would you recommend? Why? You work as a supply chain manager for Primo Caf Inc. Primo Caf is a small-sized monufacturer of stylish coffee makers. The company has three distinct coffee makers that it produces. The Bean Boiler is Primo Caf's most basic model. The main materials used in manufacturing the Bean Boiler are aluminum and plastic. There are lots of suppliers for these materials. At present, Primo Caf's total cost for producing a Bean Boiler is $13 per unit and the product is competitively priced at $20 per unit. There are lots of other coffee makers that are very similar to the Bean Boiler on the market. Still, sales of the Bean Boiler are very stable. The company reliably sells 24,625 to 25,375 units of this product per month. The Family Man is Primo Caf's mid-market offering. Primo Caf manufactures most of the Family Man in-house, but buys the glass pot and the electronics that control the on/off function and the timer. At present, final assembly of the in- house manufactured parts and the purchased sub-components occurs at Primo Caf's facility in Grand Rapids. Total cost for producing the Family Man is currently $32 per unit and each unit is sold for $34.99. The Family Man's sleek, artistic design and range of unique colors helps to distinguish it from a wide selection of similar products offered by competitors. Prices for direct competitors range from $25 to $45. Sales of the Family Man range from 19,400 to 20,600 units per month. The Saffissimg is Primo Caf's high-end offering Primo Caf produces the external casing for the Catfissing in-house, but buys all of the important sub components from external suppliers. The most important sub-components for the Saffissing are the gauges that regulate the temperature and pressure of the water as it is forced through the coffee grounds. The proper working of these gauges ensure that the Sattissimus produces a perfect cup of coffee brewing. The Saffissime's design is a closely held company secret. The machine has won industry awards both in terms of its coffee making process and its external looks. Currently, the Caffissing, costs $375 to produce and sells for $600. Because of the relatively high price and unique design demand for the Caftissing is difficult to predict. Over the past year, demand has ranged from 8,500 to 11 500 units per month. Display Settings D) Focus IG