V & T Faces

Perform differential analysis. Assume making the containers internally is Alternative 1 and buying the containers from an outside manufacturer is Alternative 2.

1) Which alternative is best? Explain.

2) Summarize the result of outsourcing production of the containers.

3) Assume all the facts of this problem remain the same. However, management of V & T Faces, Inc., has an opportunity to lease the space it currently uses to produce containers for $4,000 per month if production of the containers is outsourced. Determine if V & T Faces, Inc., would be better off outsourcing production.

4) Identify at least one qualitative factor that should be considered before management decides to outsource production of the containers.

1 V&T Faces, Inc. is amakeup company. They currently produce small plastic containers used to provide samples of the products, Management is interested in outsourcing the production of the plastic containers to a reputable manufacturing company that can supply the containers for $0.04 each V&T Faces, Inc. incurs the following monthly production costs to produce 1,000,000 plastic containers internally 2 Per unit 0.02 Total monthly costs at 1,000,000 units 20,000 25,000 45,000 Variable production cost Fixed production cost Total production cost 4 5 7 If production is outsourced, all variable production costs and 70 percent of foed production costs will be eliminated . Required: 11 Perform differential analysis. Assume making the containers internally is Alternative and buying the containers from an outside manufacturer is Alternative 2. 13 Which alternative is best? Explain Summarize the result of outsourcing production of the containers Assume all the facts of this problem remain the same. However, management of V&T Faces, Inc. has an opportunity to lease the space it currently uses to produce containers for $4.000 per month of production of the containers is outsourced. Determine V&T Faces, Inc. would be better off outsourcing production Identify at least one qualitative factor that should be considered before management decides to outsource production of the containers 15 s6 12