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Horizon Insurance Agency Case Solution

Solution Id Length Case Author Case Publisher
2782 1438 Words (6 Pages) Mark E. Haskins Darden School of Business : UVA-C-2140
This solution includes: A Word File A Word File and An Excel File An Excel File

The case reveals how Horizon Insurance company should integrate all the extensive factors, and carefully assess all of them before making the decision to outsource the production to a third-party company. From the calculations, such as the net difference in savings of ($50,000), indicates that the third-party contract will not be very profitable for the company, at least in the four-year period. However, there should be a lot of important factors, for instance, the inflation, and rising cost of materials, which may change over time and may result in a more productive decision if the third-party contract is implemented. And it is also pertinent to mention that there are a number of non-quantitative factors mentioned before, which are not easily measured, and would also play an important role in the decision-making process. For instance, the employee morale, the quality of the products produced, the brand perception of the company in the market, etc. And also requires thorough planning and adequate storming.

Following questions are answered in this case study solution

  1. Assuming no additional financial information can be readily obtained, what action should be taken? To the extent necessary, support your decision by completing the attached worksheet (Exhibit 1). 

  2. What, if any, additional financial information do you think is necessary for Wolfe to make a sound decision? 

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

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Case Analysis for Horizon Insurance Agency

1. Assuming no additional financial information can be readily obtained, what action should be taken? To the extent necessary, support your decision by completing the attached worksheet (Exhibit 1).

It is very important that an accurate cost and benefit analysis should be conducted, before making a decision. And it is pertinent to mention that the “decision horizon” should be conducted as well. So, in order to come up with the decision, it is important to inculcate the “decision horizon”. If there is a contract for one year, then the advantages would be more applicable. This is simply because the majority of the budgets are planned on a yearly basis. Moreover, it is also pertinent to mention that the relevant costs would fluctuate because of numerous factors, for instance, changes in the economic indicators of the country, the performance of the organization within that time frame, and a number of other important aspects. Thus, it would be more accurate if carried out on annual terms. Considering the Horizon Insurance case then, the contract mentioned is for a four-year tenure, nevertheless, the benefits and drawbacks are still there, as aforementioned. In the perspective of a “four-year horizon decision”, there could be some drawbacks; for instance, there could be high fluctuations in terms of the inflation or cost of the raw materials, which may or may not be accurately described.  And thus, within the “decision horizon,” the same fluctuations would not be possible to be shown. From exhibit 1, we can see that if the company opts for Myer’s numbers, the savings over the four-year contract would be around $65,500, when incorporating the G-Art contract, as the total of Myer’s figure is around $475,000 and the G-Art contract accumulates to $410,000, thus the savings earned are around $65,500. However, if the company opts for a contract, by taking the services of an outside agency, while inculcating the G-Art contract, the company would not be able to save any amount, in fact, the company will have to pay more $50,000. As, it is visible that the total of outside servicing is around $360,000 and the cost for G-Art is $410,000, hence the loss would be around $-50,000, which the company should bear, if it considers the option of taking services from a third party.

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