Manufactures cost-effective protective covers for smartphone

Assignment Help Operation Management

Reference no: EM131778732

Topnotch Protection Corporation is an American company that manufactures cost-effective protective covers for smartphones made out of innovative composite material, which currently are being sold only in the United States. Topnotch currently produces and sells 100,000 protective covers a month and operates its one factory at 60 percent capacity. At that output, the average total cost (ATC) of manufacturing a protective cover is $20 00 Experience has shown that the ATC decreases as output is expanded beyond 100,000 units per month but rises again if output is increased above 125,000 units per month. Topnotch Protection Corporation normally sells its protective covers domestically for $25.00 each It recently received an order for an additional 10,000 protective covers per month from a buyer in a foreign country where Topnotch would like to do business. This buyer specified that it would pay no more than $15.00 per protective cover. The firm’s accountants estimate that at 110,000 units a month, the ATC of producing a protective cover would be $19.00. Topnotch executives want to accept the order.

1. Draw the firm’s ATC curve and fit the MC curve to it. Then estimate MC at Q = 110,000. Use the profit-maximizing rules (assume P = MR for this paper) to answer the following questions:

a. Should Topnotch accept the offer?

b. If they accept the offer, will their profit rise or fall? By how much?

c. Are the accountants correct in their analysis? What would the production manager say?

d. Could the firm fill this order in their existing plant? Or, must expansion take place?

e. What changes in workforce, staffing, and procuring raw materials might be required to fulfill this order?

2. Whether this order is profitable or not, would it make sense to accept the order in order to expand into an international market?

Reference no: EM131778732

Questions Cloud

Ad is trying to communicate to its target audience : What is the basic message of this advertisement (not the tag line, but basic message the ad is trying to communicate to its target audience?

Number of cars in line waiting for chance to pay their toll : What is the average number of cars in line waiting for a chance to pay their toll?

Consumer sales promotion might induce impulse purchases : What forms of consumer sales promotion might induce impulse purchases? What forms of sales promotion are more effective at persuading consumers to switch brands

Companies overcome supply chain demands from globalization : Describe the main points in the Chapter; managing communication. How can outsourced companies overcome supply chain demands from globalization?

Manufactures cost-effective protective covers for smartphone : American company that manufactures cost-effective protective covers for smartphones made out of innovative composite materials

What is the average number in line waiting to be served : Consider the reference desk of a college library receives requests for assistance. What is the average number in line waiting to be served?

Relate to time of no patients rights or informed consent : Today we often find it difficult to relate to a time of no patients rights or informed consent.

Suspected of hereditary diseases and other defects : Hereditary Health Courts were established in Nazi Germany to enforce sterilization laws on individuals suspected of hereditary diseases and other “defects.”

Organization exists communication plan for customers : Describe specific ways that you might incorporate Twitter into an organization’s exists communication plan for customers.

User Account

All Pages