Description
Behemoth?Motors?Corp.?(BMC)?is?a?major?manufacturer?of?automobiles?in?the?United?States.?BMC?has?decided
to?include?a?Global?Positioning?System?navigator?(GPSN)?in?all?of?its?Sports?Utility?Vehicles?(SUV)?beginning
with?the?2016?model?year.?These?models?are?just?now?being?delivered?and?the?GPSN?units?are?manufactured?in
the?Detroit?BMC?facility.?Currently?and?for?the?foreseeable?future,?BMC?will?need?8,000?GPSNs?per?month.?The
total?manufacturing?cost?of?the?GSPN?is?$425?per?unit?calculated?as?follows:
See?attachment?for?chart:
BMC?experiences?a?high?level?of?quality?control?over?these?units?with?only?2%?of?total?production?failing?quality
control?testing.?98%?of?all?units?manufactured?are?installed?in?SUVs.
Wally?Wizard,?the?GPSN?manager,?has?been?approached?by?Far?East?Enterprises,?Ltd?(FEE)?who?has?offered?to
outsource?these?units?for?MBC.?FEE?is?a?three?year?old?electronic?manufacturing?company?located?in?China?and
has?experienced?outstanding?growth?during?that?three?year?period.?FEE?has?offered?to?manufacture?and?deliver?to
Detroit?8,000?GPSN?units?at?a?unit?cost?of?$400?beginning?on?Jan.?1,?2016.?FEE?asks?for?a?two?year?contract.
Under?the?existing?arrangement,?the?direct?materials?are?all?purchased?locally?under?month?to?month?contracts.
There?are?no?future?obligations?under?these?contracts.
There?are?100?direct?labor?employees?involved?in?this?process.?These?employees?can?be?laid?off?but?if?they?are,
BMC?must?pay?a?penalty?of?$66,000?per?year?to?the?employees?union.?This?penalty?will?continue?for?4?years.
There?are?10?supervisors,?each?earning?$6,000?per?month,?assigned?to?the?project.?If?the?product?is?outsourced,
all?of?these?supervisors?can?be?assigned?to?other?supervisory?positions?within?BMC.
If?the?product?is?outsourced,?half?of?the?factory?floor?space?can?be?used?for?storage?for?materials?that?are
currently?stored?in?rented?storage?facilities.?These?rented?facilities?currently?cost?BMC?$5,000?per?month.?There
is?no?alternative?use?for?the?remaining?factory?floor?space.?The?current?$2.50?per?sq.?ft.?charge?is?based?on?the
overall?BMC?factory?costs.
General?company?overhead?is?first?assigned?to?operating?units?on?the?basis?of?total?product?produced?and?then
further?to?produced?units?on?a?per?unit?basis.?If?the?product?is?outsourced,?this?overhead?will?be?reassigned?to
other?operating?divisions?although?total?corporate?overhead?incurred?will?remain?unchanged.
You?have?determined?the?following?additional?facts.?The?units?manufactured?by?FEE?will?have?the?same?quality
as?those?manufactured?by?BMC?and?the?delivery?schedule?will?have?the?same?reliability?as?that?of?BMC.
Case?Assignment
Make?a?recommendation?to?Wally?Wizard?in?a?3??to?4?page?paper.?Be?sure?to?support?your?recommendation?with
the?decision?making?process?outlined?in?the?background?information.
Assignment?Expectations
It?is?important?to?answer?the?questions?above.?The?discussion?should?be?three?to?four?pages?and?written?in?a?clear
and?concise?manner.?Support?your?discussion?with?references?in?APA?format.?You?are?encouraged?to?use?Excel
or?other?compatible?spreadsheet?when?computations?are?involved.

 

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