LCC Labs manufactured and sold a range of high-grade chemical reagents to hospitals and freestanding laboratories throughout the world. Many of its products required careful packing, and the company had always emphasized the importance of the special property of its containers: a patented lining, made from a material known as GHL. LCC operated a department especially to maintain its containers in good condition, and to make new ones to replace those that were past repair.

Dale Walsh, the general manager, had for some time suspected that the firm might save money and get equally good service by buying its containers from an outside source. After some careful inquiries, he approached a firm specializing in container production, Packages, Inc., and asked for a quotation. At the same time, he asked Paul Dyer, his chief accountant, to let him have an up-to-date statement of the cost of operating the container department. 

Assignment

1.Identify the four alternatives implicit in the case

2Using cash flow as the criterion, which alternative is the most attractive?

3What additional information, if any, do you think is necessary to make a sound decision?