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Catawba Industrial Company

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by

Zhu Yunze

on 25 October 2013

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Transcript of Catawba Industrial Company

Other Concerns
Catawba Industrial Company
Highest Financial Return Plan
STRATEGY 2
TWO STRATEGIES
No produce on Sunday

Produce Light weight Model on Sunday
TWO PRES
10 Standard Model should be produced per week at least.

We keep integer part only for convenience
STRATEGY 1
STRATEGY 1
DAILY COST OF LIGHT WEIGHT
HOW MANY UNITS PRODUCED
Financial Return of Strategy 2
Profit of Strategy 1: $45,690.00
Profit of Strategy 2: $44,720.50
We should choose Strategy 1 which produces 10 units of Light Weight Model and 13 units of Standard Model on weekdays and 4 units of Standard Model on Saturday, no produce on Sunday.
Open or Close ?
Direct labor:
62.5 hours/unit x $20/hour = $1250/unit
100 hours/unit x $20/hour = $2000/unit
$417,000 (hardware and hoists)
$218,000 (additional jigs & sensors &software)
25% of COGS
10% of COGS
Opportunity Cost
Higher than Marge had anticipated!
Could generate a higher profit!
BUT:
Customers with standard units need to carry another set of spare parts.

The compressor department was operating at full capacity.

Revisions to manufacturing and marketing plans can only be made in November and May.


Operate on Sunday?

Introduce or not?

At what volume & what price?
Profitability for Light Weight Compressor
Total: 400 hours/day
Light-weight: 6 units/day
Standard: 4 units/day
Strategy 1
Do not recommend Marge to
set this new model Immediately.
Outsource
Standard Model
Full transcript