# Maxicure (Darden 2018)

Neue Antwort am 28. Sept. 2022
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I'm curious about the structure of the answer for Question 2.

For the outsource option, the answer suggests that the volume required for insourcing to be profitable is greater than 20M….(X-20M)(*2) + (20M)*(2.25).

If the volume were 15M, then the second factors of this equation can't hold true. Does anyone have a different way of solving this?

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Yes, the formula doesn't work if volumes are below 20M however you have to notice that…

…in the in-house option, the initial investment is \$50M, meaning that you need to sell 20M bottles with \$2.5 margin to make any money.

So if the volumes are below 20M, outsourcing is always better.
If volumes are above 20M, you should use the suggested formula.

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Hey Tim!

Could you provide a bit more context here?

What are the values provided and what is the case actually asking you to calculate?

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Hi!!

In cases when margins are equal to or higher than \$2.5, insourcing would never beat outsourcing. In other cases, the formula still applies.

Take an example of a tricky case where X is cancelled out, if volumn were 15M, and for example investment cost were 30M, margin would have to be \$2 → cost to self-produce were \$2.5 (just as high as the highest cost to outsource), which means there's no way insourcing can beat outsourcing.

Thus, I think the formula still works, and we may need to look outside the formula a bit :)

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Pedro gab die beste Antwort
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