Operation Decision

Topics: Variable cost, Marginal cost, Total cost Pages: 5 (1758 words) Published: July 23, 2012
Assignment 1: Operation Decision
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. It also tells us that the firm's fixed cost is “high enough” so that the firm's total costs exceed its total revenue. The marginal cost of the last unit is $30. This assignment allows you to determine the specific details about this fictitious company in order to conduct an environmental scan of this company 1.Briefly describe the details of the fictitious business that you created for this assignment. In this paper, you will learn of a fictitious business, DCM, Inc., based out of Athens, Georgia and is the leading provider of consumers, especially college students, and business-to- organizations of a product known as widgets. DCM, Inc. employees 100 workers and they have hired in a consultant for advice to help them decide whether it should shut down, or if it has enough work to continue operations. DCM, Inc. was established in 2008 by Denise Brinson, which named the organization after herself, and her two adult children, Christopher and Misti. Now, all three are attending college and she developed these particular widgets to help all college students including herself and her children. Due to area competition and technological advancement, Denise has found that she must make some changes in the organization and/or product. Other information about DCM includes:

They employ 100 workers
They produce 6,000 units of output per month
They work 20 days/month
The average daily wage is $70/worker
The firms output is $32
The cost of other variable inputs is $2,000/day
The consultant is told that the units fixed cost is “high enough” so that the firm’s total cost exceeds the total revenue. The consultant also knows that the marginal cost of the last unit is $30. 2.Assess the current environmental scan factor. Determine the factors that will have the greatest impact on plant operations and management’s decision to continue or discontinue operations. The definition for environmental scanning is:

“Careful monitoring of an organization’s internal and external environments for detecting early signs of opportunities and threats that may influence its current and future plans” (Business.Diction.com). The environmental scan factor (presented by Albrecht, K., 1994 in his book titled: The Northbound Train: Finding the Purpose, Setting the Direction, Shaping the Destiny of Your Organization) refers to several areas that when looking at them will help in the decision process as whether to continue or discontinue operations. There are eight areas in this scan that will help in the decision process. The following is a list of those areas and what is included: “1, Customer Environment – the identity, wants needs, behaviors, habits, values, and life situations of those who do business with you. This category deals with both demographic and psychographic includes such factors as gender, age, marital patterns, birthrates, education, economic situations, buying habits, religious patterns, mobility and the like. 2 Competitor – this involves the identity, motives, strengths, weaknesses, current behavior and potential behavior of the other enterprise that compete for your customers’ resources. 3.Economic environment – The dynamics of markets , capital, critical resource, costs, prices, currency, state of the national economy, and the state of international trade, all of which may affect the buying patterns of the customers, the behavior of competitors, and the opportunities open to your own enterprise. The economic environment is a very complex one, and it helps to...
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