Economic Team Analysis: To Make In-House Vs. Outsource Sandblasting Operations

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Economic Team Analysis To Make In-House Vs.
Outsource Sandblasting Operations

• Team 6
• Organizer Oscar Delgado
• Techies Komkit Petprasit, Arman Then
• Summarizer Adolfo Wurts

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Racso Mold Company

• Owner is Kelvin Modesto
• Location Riverside, Ca
• 4 employees
• In business 5 years
• Part for analysis Ejector Pins for Wheel Molds
  (approximately 18 length x 1 ½ Diameter)

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Objectives

• Particular Process/Problem Sand Blasting Ejector
  Pins
• To determine whether it is less expensive to
  outsource sand-blasting work versus buying the
  equipment and doing it in-house.

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Scenario 1 In-House Sand Blasting

• Fixed Cost 240.00
• Useful lifecycle of equipment (depreciative value
  per year of each piece approximately 3 yrs.)
• Wages 12 / Hr
• Variable Cost
• Maintenance of equipment Ceramic tips for sand
  blaster guns 7 ea.
• Additional supplies Fine Grit Sand _at_ 22/ ea.
• Additional labor Power Usage to run Industrial
  Size Compressor

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Scenario 2 Outsourcing Sand Blasting

• Vendor American Foundry location Riverside, CA
  
• Costs 4.00 / Bar
• Shipping Racso Mold Company Truck
• Vendor can produce 25 sandblasted bars in
  approximately 2 hrs.

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Future Expectations

• At what volume would outsourcing and in-house
  production be economically equivalent?
• Is this volume reasonable or beyond any realistic
  future growth expectations?