Wgu Est1 Task 3

JGT2 Task 3
Memo
The question has been presented as to the best option regarding production for Shuzworld. There are several factors that should be considered when making this analysis. It has been provided that the costs of reconditioning the current equipment will be $50,000 fixed costs and $1,000,000 variable costs. Additionally, purchasing new equipment will produce fixed costs of $200,000 and variable costs of $500,000 and outsourcing will have no fixed costs with variable costs of $300,000. These figures can be input into the breakeven cost volume analysis module in POM for Windows and it can be determined that the best option for Shuzworld is to purchase new equipment. This is recommended as the best option due to the data received from the breakeven
The fixed and variable costs of each option can be evaluated by the tool with the consideration that all variable costs as a constant with the relationship between those two costs as linear and not exponential. The data used in this analysis was provided by Alistair Wu and Angela Down and using this information the volume was set to 1000 pairs of sneakers. The data received as outline above show that the cost to outsource would be 2 times that of reconditioning and 4 times the cost to purchase new equipment. It can be determined by this data that although the fixed costs of purchasing new equipment are higher, the variable costs are lower, making purchasing equipment the best option. Using the breakeven cost volume analysis module of the POM for Windows, a chart was created that shows the breakeven point of each option. It also demonstrates the