Liquid Chemicals

In: Business and Management

Submitted By rameshmandava
Words 539
Pages 3
Analysis of
Case Liquid Chemical Company

Include a Brief Summary of Case Study

…..

Questions and Problems for Consideration
1. Given the two alternatives do the work inside or subcontract it to Packages Ltd?
2. What are the advantages of one alternative over the other?
3. Which action would you favor?

1. Given the two alternatives do the work inside or subcontract it to Packages Ltd.?

Two alternatives for Liquid Chemical Company to decide are keeping the container department of its company and signing the contract with Packages, Ltd. With helping Walsh to make an efficient decision, we’ll try to eliminate all sunk costs and costs that don’t differ between alternatives.

|Cost of Operating the Container Dept. |Cost of Contract with Packages. Ltd. |
| | |
|Labor $100,000 |Contract--New $250,000 |
|Rent: Plant 90,000 |Contr.--Maint. 75,000 |
|Rent: Warehouse 170,000 | |
|Other expenses 15,000 | |
|Part of G &A 45,000 | |
|Total $339,000 |Total $325,000 |

The total difference between keeping the container department and signing the contract with Package Ltd. will be $14,000. Since the…...

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