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

This economic team analysis evaluates the costs of sandblasting ejector pins in-house versus outsourcing the operation. The analysis examines fixed costs, variable costs, and potential future growth expectations to determine the most cost-effective option.

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

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  1. Economic Team Analysis: To Make In-House Vs. Outsource Sandblasting Operations Team 6 Organizer: Oscar Delgado Techies: Komkit Petprasit, Arman Then Summarizer: Adolfo Wurts

  2. 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)

  3. 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.

  4. 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 @ $22/ ea. • Additional labor: Power Usage to run Industrial Size Compressor

  5. 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.

  6. 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?

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