Albatross Anchor: Operations Management

Topics: Costs, Variable cost, Management accounting Pages: 2 (436 words) Published: February 23, 2013
Unit three Written Assignment
Tiara Mureithi
MT435 Operations Management
Kaplan University
02/19/2013

Introduction
Question One
Based on the information presented in the scenario/case study discuss Albatross Anchor’s competitiveness in relation to (please address all items in the below list and provide support for your conclusions): 1. Cost

a) Cost of Production: Manufacturing costs are $8.00 per pound for the Albatross mushroom/bell anchor and $11.00 per pound for Albatross snag hook anchor. Albatross sells the anchors for the same price as competitors. However, Albatross can have a 35% less profit margin. (Russell & Taylor, 2011, p. 230).

b) Economies of Scale in material purchasing: company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods (Hindle, 2008). As a company grows and production units increase, a company will have a better chance to decrease its costs. According to theory, economic growth may be achieved when economies of scale are realized (Heakal, 2009). There are two types of economies of scale – external and internal. External are economies that benefit a firm because of the way in which its industry is organized. Internal are cost savings that accrue to a firm regardless of the industry in which it operates (Hindle, 2008).

c) Cost of Raw Materials Sitting Idle in the Warehouse:
d) Cost of Finished Goods Sitting Idle in the Warehouse:
2. Speed of manufacturing process from order to finished product. 3. Flexibility in filling order(s)
4. Technology
5. Capacity and facilities
6. Service to customers
Question Two
There are many ways that mushroom/bell anchors may be manufactured. Albatross Anchor is considering two new manufacturing processes (Process A and Process B) to reduce costs. Analysis of the information below will help determine which process has the lowest breakeven point (this validates the process...
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