Operations Decision Economics

Assume you have been hired as a managing consultant by a company to offer some advice that will help it make a decision as to whether it should shut down completely or continue its operations. It currently uses 100 workers to produce 6,000 units of output per month (working 20 days/month). The daily wage per worker is $70, and the price of the firm’s output is $32. The cost of other variable inputs is $2,000 per day. You are told that the firm’s fixed costs is “high enough” so that the firm’s total costs exceed its total reveneue. The marginal cost of the last unit is $30.

1. Briefly describe the details of the comapny you have made up for this assignment.

2. Assess the current environmnental scan factors that are relevant to the decision making process. Determine the factors that will have the greatest impact on plant operations and management’s decision to continue or discontinue operations. Provide a rationale for your determination. Include any equations you use to make this determination.

3. Evalue the finacial performance of the company using the information provided in the scenario. Consider all the key drivers of performance, such as company profit or loss for both the short term and long term and how each factor influences managerial decisions. Be sure to show the calculations that helped reach your conclusions.

4. Recommend how the company can improve its profitability to deliver more value to its stakeholders. Then develop a brief plan to implement the recommendations.

5. Assess the circumstances in which the company should discontinue operations and hw management should react wne confronted with these circumstances. Provide a rationale with your response.


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