Translation Cost per Page in a Three-Option Sourcing Decision
The translation unit of an EU agency must deliver 1,200 standard pages by 30 June. It has three sourcing options. Supplier A charges a fixed availability fee of €5,000 plus €40 per page; if the order reaches 1,000 pages or more, the per-page rate falls to €36 for all pages. Supplier B charges €48 per page with no fixed fee, but its framework caps any single invoice at €55,000. The agency's own language service can produce 250 pages at a marginal cost of €25 per page, but only if those pages are removed from the external order; it cannot handle more than 250 pages before the deadline. All prices exclude VAT, which is recoverable and should be ignored. The unit's budget line for this work is €50,000, and the deadline is fixed. No other supplier is available.
1. Calculate the total cost of three options: (i) all 1,200 pages to Supplier A; (ii) all 1,200 pages to Supplier B; (iii) 250 pages to the internal team and the remaining 950 pages to Supplier A. Which option is cheapest, and which options fit the €50,000 budget?
Read the worked answer
(i) Supplier A, all 1,200 pages The order reaches 1,000 pages, so the discounted rate applies to all pages: €5,000 + (1,200 × €36) = €5,000 + €43,200 = €48,200.
(ii) Supplier B, all 1,200 pages The uncapped invoice would be 1,200 × €48 = €57,600, but the framework cap is €55,000, so the invoice is €55,000.
(iii) Internal 250 + Supplier A 950 Supplier A now receives only 950 pages, which is below the 1,000-page threshold, so the €40 rate applies: External: €5,000 + (950 × €40) = €5,000 + €38,000 = €43,000. Internal: 250 × €25 = €6,250. Total: €43,000 + €6,250 = €49,250.
Conclusion: Supplier A alone is cheapest at €48,200. It fits the €50,000 budget, as does the internal-plus-A mix at €49,250. Supplier B at €55,000 exceeds the budget. The internal option is not the cheapest once its effect on Supplier A's volume discount is included.
2. Supplier B's invoice is capped at €55,000. Ignoring the 1,000-page discount threshold for a moment, at what order size would Supplier A's discounted price equal that cap? What does this imply for a 1,200-page order?
Read the worked answer
Set Supplier A's discounted cost equal to B's capped invoice:
€5,000 + €36p = €55,000 €36p = €50,000 p = 1,388.9
So the two are equal at approximately 1,389 pages. Below that volume, Supplier A's discounted price is lower than B's cap; above it, B's cap would be lower.
For a 1,200-page order, this means B's cap does not make B cheaper. At 1,200 pages, A costs €48,200, while B is capped at €55,000. The cap only becomes decisive at a substantially larger volume. The analytical point is that a cap is not the same as a low price: it limits the maximum invoice but does not reduce the per-page cost below A's discounted rate at this order size.
3. Using 250 internal pages and 950 pages from Supplier A costs more than giving all 1,200 pages to A. Explain the arithmetic and the behavioural point for the unit's sourcing decision.
Read the worked answer
The arithmetic is a threshold effect, not a failure of the internal team.
- Supplier A alone: €5,000 + (1,200 × €36) = €48,200.
- Mixed option: €5,000 + (950 × €40) + (250 × €25) = €43,000 + €6,250 = €49,250.
- Difference: €49,250 − €48,200 = €1,050 more.
The internal team saves money relative to the discounted external rate: 250 × (€36 − €25) = €2,750. But removing those 250 pages drops the external order to 950 pages, below the 1,000-page threshold. The remaining 950 pages therefore lose the €4 discount: 950 × €4 = €3,800. The lost discount exceeds the internal saving by €1,050.
The behavioural point is that fixed fees and volume thresholds make 'use internal capacity first' a poor rule of thumb. The unit should compare options at the margin and check whether internal work preserves or destroys an external discount. Here, the cheapest compliant option is to keep the external order above the threshold and use internal capacity only if it can be added without reducing the external volume.