Cover the fixed costs of the machinery and setup

Assignment Help Operation Management

Reference no: EM131268611

Big Lu knows he can sell at least 15,000 cases, but he wonders if that will be enough to cover the fixed costs of the machinery and setup. These costs have been estimated at $300,000. Additionally, Big Lu tells you he can purchase the cases from China for $10 each. He also estimates the variable costs to make them in house is $7 each.

Should Big Lu make the cases in house or purchase them from China?

How many units would Big Lu have to sell to make his optimal decision change? (Hint: Adjust the production volume until the Cost Difference (In-house—Outsourced) = $0.

At the sales volume of 15,000 units, how much profit will the company make if they follow your suggestion?

What are some other variables that must be considered when making the decision to make the cases in-house or outsource? Name at least three and why those are important to the decision.

Reference no: EM131268611

Questions Cloud

Find the generator and the parity check matrices : Find the generator and the parity check matrices of a second-order (r = 2) Reed-Muller code with block length n = 16. Show that this code is the dual of a first-order Reed-Muller code with n = 16.

Determine how long it will take for his total investment : Use graphical approximation methods to determine how long it will take for his total investment in the two accounts to grow to $35,000.

Employ subsidies in the market for particular goods : Define per unit subsidy and explain why a government may want to employ subsidies in the market for particular goods and services.

Evaluating the success of a marketing strategy : You know various criteria for evaluating the success of a marketing strategy: profitability, variance to target, customer satisfaction, monitoring of sales staff, etc. How will you know if your marketing plan is successful? What is most important to ..

Cover the fixed costs of the machinery and setup : Big Lu knows he can sell at least 15,000 cases, but he wonders if that will be enough to cover the fixed costs of the machinery and setup. These costs have been estimated at $300,000. Should Big Lu make the cases in house or purchase them from China?..

Traditional carriers in the short term : In a period of rising fuel prices, and thus higher airfares, do you think that low cost carriers are more or less vulnerable than the traditional carriers in the short term?

Suggest a parity check matrix h for c : Can you suggest another (6, 3) LBC that can provide a better coding gain? If the answer is yes, what is its generator matrix and the resulting coding gain? If the answer is no, why?

Explain the different steps in the communications model : Identify and explain the different steps in the communications model. What does the distribution value chain for Pandora look like? How does Pandora's distribution actually "add value" to their listeners? Discuss the common types of information inclu..

Principles of macroeconomics : Circular flow diagrams, as stated in Macro Econ 5, Principles of Macroeconomics, "traces the flow of resources, products, income, and revenue among economic decision makers" (McEachern, 2017) this means that a person is able to determine where th..

User Account

All Pages