Operation Research

In: Business and Management

Submitted By arunddhutiray
Words 826
Pages 4
Cases in Operation Management

Semester 4

PGDBA (Operations)

Page 1

Question-: 1

The “Quality Auto Works” is a manufacturer of auto parts. All the auto parts being
manufactured in the industry are required to be phosphated for surface protection.
Presently other small units are done this phosphated work.
Quality Auto Work is now thinking of installing its own phosphating plant and is
interested about knowing about following.
(A) Should the install new plant or continue the present practice of subcontracting?

For finding out whether the firm should do the phosphating work by own or it should
contract other for the some one, we have to compare both the cost which are as follows.

Annual Cost of subcontracting

Cost of purchase

=6.25x12000x12 =9, 00,000/-
Cost of Transportation
Total Cost
=1800x12=21600/-
=9, 21,600

Annual cost for installing own phosphating plant:

Installation cost of plant: 2, 80,000x0.2452= 68,656/-
Labor cost
Benefit to labor
Power
Raw material
: 8000x12 =
: 96000x40/100 =
: 12,000x0.23x12 =
: 12000x0.45x12 =
96,000/-
38,400/-
33,120/-
64,800/-
Total cost of installing
=
3, 00,976/-

According to above calculation installing its own plant will benefit form.

(B) If the phosphating work expected to go up around 30,000Kg, what should the
company do?

In this case also both type of cost are to be compared, which are as follows:

Cost of purchase:

6.25x30, 000x12

=2,250,000/-
Cost of transportation: 18000x12…...

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