Unfortunately, project CC never met Primo Caf's margin targets, and the project was canceled. Gianna, Primo's Chief Marketing Officer, and Marco, the Chief Operating Officer, are now arguing over the fate of the Bean Boller. The Bean Boiler is Primo Caf's most basic model. It is competitively priced at $20 per unit and the company sells 25,000 units per month. Fixed annual costs and variable costs for the Bean Boiler are presented below. Gianna sees the Bean Boiler as a loser. There are lots of competitors that are rapidly eating into Primo's market share - and although sales have been stable, the company's best projections are that Bean Boiler sales volume will decline by 14% year-on-year over the next five years. Glanna wants to pull company manufacturing resources from the Bean Boiler now and invest as soon as possible in a new product - a French press she's designed called the Brassage Frais. Brassage Frais will complement the Caffissimo in the high-end market and since it has a unique intellectual property, it is believed that the Brassage Frais will drive the company's growth strategy in the next 5 years. Marco is not convinced. From a manufacturing perspective, producing 25,000 Bean Boilers a month is easy. Plus the Bean Boiler currently pulls in about $6,000,000 in revenue per year. Marco doesn't see why the company should give up the profit for an unproven product like the Brassage Frais. And while Marco concedes there's nothing special about Primo's production process - other companies make essentially the same product in the same way-Marco is convinced it is cheaper to produce in-house than outsource. In fact, when Marco asked you to find a potential outsourced supplier for the Bean Boiler, your best supplier is Legit Manufacturing with a price of $13.50 per unit. Also, Primo Caf will need to purchase tooling (unique tooling, figtures and gages for production) to be located at Legit, which will cost Primo $20,000 annually to maintain regardless of volume. From your site visit of Legit, Legit seems to have the quality culture and experience that is needed to manufacture the Bean Boller. Apply the make-buy pillars 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 Primo Caf should do. Given the information above and what you know about the product you are sourcing - what would you recommend? What should be your (and Marco's) next steps? | 25,000/ month Year 0 300,000 Year 1 Year 2 Year 3 Year 4 Year 5 Forecast (units) In-House (Cost to Make) Direct Materials Direct Labor Variable Ohvd Total Variable Cost Fixed Mfg Onhd Total Cost to Make Outsource (Cost to Buy) Price perunit Fixed Cost (Buy) Total Cost To Buy At what quantity, Q does the cost to make equal the cost to buy? Q=