A Company Asked One of Their Analysis Team to Analyze

question 18

Essay

A company asked one of their analysis team to analyze and create models that help decide whether they should manufacture a particular product or outsource its production. The different components are given below.
Fixed Cost, FC = $25,000
Material Cost per Unit, MC = $2.15
Labor Cost per Unit, LC = $2.00
Outsourcing Cost per Unit, O = $4.50
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a. Build an influence diagram that illustrates how to calculate the difference in cost of manufacturing and outsourcing.
b. Using mathematical notation, construct a mathematical model for calculating the difference in cost of manufacturing and outsourcing.
c. Implement your model from part (b) in an Excel spreadsheet model using the principles of good spreadsheet design.
d. Using the spreadsheet model, what will be the resulting savings due to outsourcing if the company wants to make 30,000 units of a particular product?
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Definitions:

Conditioned Response

A learned response to a previously neutral stimulus that has become conditioned by being paired with an unconditioned stimulus.

UCS

Unconditioned Stimulus; a stimulus that triggers a naturally occurring response without the need for prior learning.

Flavor Aversion Conditioning

A learning process in which an organism learns to avoid a particular taste because it has been associated with a negative reaction, such as nausea or discomfort.

Temporal Conditioning

A technique in which the presentation of the unconditioned stimulus (UCS) at regular intervals causes the internal state present at the time of the UCS to become able to elicit the conditioned response (CR).