Rentex Motor Drives Decision for a Motor Assembly

Question

Rentex Motor Drives is a division of a large U.S. manufacturer of industrial machinery and equipment.  Rentex is faced with an insource/outsource decision for a motor assembly.  Read the case The case scenario, located at the following link:

Insourcing/Outsourcing at Rentax

Questions:

1. Preparea three-year insourcing/outsourcing total cost analysis and identify your recommendation based on your analysis. This analysis should include a build-up of the total unit cost by cost element. Be sure to identify any expected savings, if any, from outsourcing.
2. Identify and evaluate any qualitative factors that should be considered during this analysis.
3. A challenge when developing total cost models involves including all relevant cost elements. Identify any costs that might be missing from your model. What are some hidden costs that are often difficult to include in the analysis?
4. Another challenge when developing total cost models for insourcing/ outsourcing analysis is the proper allocation of internal overhead. What are your recommendations for properly allocating overhead?
5. Assume that the insourcing overhead costs that were expected to go away with outsourcing do not all go away. How does this affect the mechanics or outcome of the insourcing/outsourcing analysis?

Summary

This question belongs to finance and discusses about insource/outsource decision for a motor assembly.

Word count: Answer is in Excel Format