COMM 370
CFO: “Luckily I do not work in production and thus do not need to worry about this.”
Based on concepts covered in COMM 354 provide a critique of this statement.
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This is absolutely misguided thinking : disagree, the CFO should worry about this
CFO is concerned about cash and this will increase the cash outlay!
There is a potential opportunity cost of lost sales.
There is a “cost of capital” cost if this adds significant time. Delays have a cascaded effect and create disruptions from the marketing side and drive incremental cost from the accounting side.
This will change the cost model and thus have a bearing ondecision-making.
What was profitable might now be unprofitable.
Profitability is a function of revenues and costs. This will not only change costs it is likely to influence revenues as the products might be time sensitive due to seasonality and, or technology (Sony)
A core issue is that cost accounting is not limited to production (Tamahuy) and that supply chain is in fact a major cost of many products (Coke).
Nieve Ltd.
A second machine has been installed that is similar to MACHINE 2 to double the capacity to #4,200 hours.
Optimal Value from Solver THIS IS A NEW LP OUTPUT 1,500,000
Bold Items changed ($,200 and 14,000)
Final Shadow Constraint Allowable Allowable Name Value Price R.H. Side Increase Decrease Machine 2 4,000
0
4,200 Infinity 200 Machine 1 2,100 600 2,100 300 1,300 Direct labor 11,600
0
14,000 Infinity 2,400 Plastic 98,000
0
108,000 Infinity 10,000 Demand Basic 26,000
0
32,000 Infinity 6,000 Demand Advanced
0
0 9,000 Infinity 9,000 Demand Extreme 8,000 30 8,000 400
Based on concepts covered in COMM 354 provide a critique of this statement.
------------------------------------------------
This is absolutely misguided thinking : disagree, the CFO should worry about this
CFO is concerned about cash and this will increase the cash outlay!
There is a potential opportunity cost of lost sales.
There is a “cost of capital” cost if this adds significant time. Delays have a cascaded effect and create disruptions from the marketing side and drive incremental cost from the accounting side.
This will change the cost model and thus have a bearing ondecision-making.
What was profitable might now be unprofitable.
Profitability is a function of revenues and costs. This will not only change costs it is likely to influence revenues as the products might be time sensitive due to seasonality and, or technology (Sony)
A core issue is that cost accounting is not limited to production (Tamahuy) and that supply chain is in fact a major cost of many products (Coke).
Nieve Ltd.
A second machine has been installed that is similar to MACHINE 2 to double the capacity to #4,200 hours.
Optimal Value from Solver THIS IS A NEW LP OUTPUT 1,500,000
Bold Items changed ($,200 and 14,000)
Final Shadow Constraint Allowable Allowable Name Value Price R.H. Side Increase Decrease Machine 2 4,000
0
4,200 Infinity 200 Machine 1 2,100 600 2,100 300 1,300 Direct labor 11,600
0
14,000 Infinity 2,400 Plastic 98,000
0
108,000 Infinity 10,000 Demand Basic 26,000
0
32,000 Infinity 6,000 Demand Advanced
0
0 9,000 Infinity 9,000 Demand Extreme 8,000 30 8,000 400