Question.1369 - A manufacturer has decided to outsource and offshore a small electric motor that it currently manufactures itself. It has found an offshore supplier that charges $925,000 for a minimum order quantity of 5,000 motors. Shipping costs for this quantity are $15,000. The buyer expects to place four orders per year to meet its annual need for 20,000 motors. Annual carrying cost is 25% of unit price, and import tariffs are 12% of unit price. The company expects to spend $12,500 per year on contracting and relationship maintenance. What is the total cost of outsourcing and offshoring this motor?
Answer Below:
$212.28 per unit
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