1. Using Figure C11.1 on page 488 estimate the cost to produce 250,000 housing units over the next year. Use the resin, labor, and molding unit costs as stated in the case, plus inventory carrying costs of $19,500, 1 management employee at $80,000, and property taxes of $2,925. How does this compare to the cost of purchasing housing units for one year? Assuming that the housing design will be changed at the end of one year and therefore the molding unit will become obsolete, is it financially better for the company to make or buy the housing units?
2. What are some of the hidden costs of outsourcing that might apply to this case that are not part of the above calculation? How might those costs affect the make or buy decision?
3. Assume that there are no viable domestic sources for the housing. What additional costs might be incurred by sourcing the housings from Asia? How might those costs affect the make or buy decision?
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