Eco 561 Week 3 Cost Analysis
Cost Scenario
University of Phoenix
Dillian Rivera Alvarez
ECO/561PR ECONOMICS-PUERTO RICO
March 25, 2014
Dr. Jose Toral Munoz
Cost Scenario The cost scenario summary there is a big challenge on whether to purchase and obtain more units of cell phones. This decision will imply for San Juan cell phone more sales and this will produce more cost benefit in term of profit. This decision has to be made based on opportunity cost and cost concepts and an analysis of contribution.
Maria is the business developer for San Juan Cell Phones. Maria has a big challenge as her meeting with the production manager Lisa Norman approaches, where Maria has to based her decision on what she has to proceed with the business …show more content…
development. Lisa, want’s to cave in an opportunity to operate the factory at full capacity and at a full total factory total productivity. They have to take into consideration the alternatives that will continue the factory in total profitability. San Juan Cell Phones has two production lines the Alpha and Beta model line that they run at the factory.
These models have different costs per unit, variable cost per unit, fixed overhead and profits. Maria has secured an order of 100,000 phones. The Alpha model is an identical product that the San Juan Cell phones that the Big Box. Big Box will not pay not pay for over $15.00 for each cell phone based on the $20.00 per unit that makes Maria reconsider or analyze more profoundly her decision. The Beta Model in the unit profitability report shows a higher range in the price per unit, variable cost per unit, fixed overhead and profit. To make a managerial decision Maria has to evaluate the fixed costs and the variable costs, this will allow to proceed with a safe and useful decision. Maria has to evaluate certain criteria for San Juan Cell Phone such as the how the product sales , the cost of goods sold , variable operating and marketing expenses for the Alpha and Beta models. The product price, variable cost and fix overhead for the Alpha model are lower than the Beta model in the unit profitability …show more content…
report.. The opportunity cost decision will be bases in which is the next best alternative as a result of opportunity cost decision. Maria and Lisa have to evaluate with the information provided that their shift from one model to the other will not affect the productivity at the factory and the profits. In the scenario Lisa believes she can complete the order with the order of 30,000 of the Beta models. The two options have to be based on the opportunity cost which is useful when evaluating the cost and benefits choice which is often expressed in non monetary terms as opposed to the cost of goods sold. The cost opportunity for the cost of the product of one model selected is opposed to the one not selected. In the incremental cost and contribution analysis the information given to analyze the financial situation and base a decision.
The key is to increase revenues by decreasing expenses to improve productivity Lisa has to determine if this is going to business opportunity or a set back on productivity. The cost concept identifies cost reduction in the business overhead.
The Beta model has some risks because of the price and the difference in amount . The difference in amount from $15.00 but the situation is that Big Box has a non negotiable price of $14.00 that was established for the production of the Beta Model. This will put in jeopardy Lisa’s position that productivity will decrease and Maria’s desire to sell more with an advance model and increase the profit and with the higher numbers for Beta model in the long run this could be a negative impact for San Juan Cell phones. Maria wants to keep the productivity thus producing employment with a model that will sure provide a high demand and insure her position as business development specialist and Lisa wants her desire to have a product that will provide customer satisfaction. Both prices for the two models are prices which come close in cost per unit and would generate good profits for the company thus maintaining
productivity.
The Alpha model would be a good business alternative because it can provide a good 100,000 units for production plus they have an excess capacity of the excess 70,000 cell phones units that will extend for the 90 days period. To keep this it should be kept with the alternative of the model with the cost of $14.00 per units to continue a solid profit and to keep the costs in a comfortable position and keep the company’s profits. Lisa has a desire but she has to deal with her resources. In the position to obtain another model the contribution analyze has to be evaluated to decide if it will be a good alternative thus preventing to put in hazard the productivity and profits of the company.
.
References
A life-cycle cost scenario. (1999). Building Operating Management, 46(9), 1. Retrieved from http://search.proquest.com/docview/203426220?accountid=458 Hospital board mulling over hospital cost scenarios. (2008, Feb 06). Lakes District News. Retrieved from http://search.proquest.com/docview/374440121?accountid=458
University of Phoenix
Dillian Rivera Alvarez
ECO/561PR ECONOMICS-PUERTO RICO
March 25, 2014
Dr. Jose Toral Munoz
Cost Scenario The cost scenario summary there is a big challenge on whether to purchase and obtain more units of cell phones. This decision will imply for San Juan cell phone more sales and this will produce more cost benefit in term of profit. This decision has to be made based on opportunity cost and cost concepts and an analysis of contribution.
Maria is the business developer for San Juan Cell Phones. Maria has a big challenge as her meeting with the production manager Lisa Norman approaches, where Maria has to based her decision on what she has to proceed with the business …show more content…
development. Lisa, want’s to cave in an opportunity to operate the factory at full capacity and at a full total factory total productivity. They have to take into consideration the alternatives that will continue the factory in total profitability. San Juan Cell Phones has two production lines the Alpha and Beta model line that they run at the factory.
These models have different costs per unit, variable cost per unit, fixed overhead and profits. Maria has secured an order of 100,000 phones. The Alpha model is an identical product that the San Juan Cell phones that the Big Box. Big Box will not pay not pay for over $15.00 for each cell phone based on the $20.00 per unit that makes Maria reconsider or analyze more profoundly her decision. The Beta Model in the unit profitability report shows a higher range in the price per unit, variable cost per unit, fixed overhead and profit. To make a managerial decision Maria has to evaluate the fixed costs and the variable costs, this will allow to proceed with a safe and useful decision. Maria has to evaluate certain criteria for San Juan Cell Phone such as the how the product sales , the cost of goods sold , variable operating and marketing expenses for the Alpha and Beta models. The product price, variable cost and fix overhead for the Alpha model are lower than the Beta model in the unit profitability …show more content…
report.. The opportunity cost decision will be bases in which is the next best alternative as a result of opportunity cost decision. Maria and Lisa have to evaluate with the information provided that their shift from one model to the other will not affect the productivity at the factory and the profits. In the scenario Lisa believes she can complete the order with the order of 30,000 of the Beta models. The two options have to be based on the opportunity cost which is useful when evaluating the cost and benefits choice which is often expressed in non monetary terms as opposed to the cost of goods sold. The cost opportunity for the cost of the product of one model selected is opposed to the one not selected. In the incremental cost and contribution analysis the information given to analyze the financial situation and base a decision.
The key is to increase revenues by decreasing expenses to improve productivity Lisa has to determine if this is going to business opportunity or a set back on productivity. The cost concept identifies cost reduction in the business overhead.
The Beta model has some risks because of the price and the difference in amount . The difference in amount from $15.00 but the situation is that Big Box has a non negotiable price of $14.00 that was established for the production of the Beta Model. This will put in jeopardy Lisa’s position that productivity will decrease and Maria’s desire to sell more with an advance model and increase the profit and with the higher numbers for Beta model in the long run this could be a negative impact for San Juan Cell phones. Maria wants to keep the productivity thus producing employment with a model that will sure provide a high demand and insure her position as business development specialist and Lisa wants her desire to have a product that will provide customer satisfaction. Both prices for the two models are prices which come close in cost per unit and would generate good profits for the company thus maintaining
productivity.
The Alpha model would be a good business alternative because it can provide a good 100,000 units for production plus they have an excess capacity of the excess 70,000 cell phones units that will extend for the 90 days period. To keep this it should be kept with the alternative of the model with the cost of $14.00 per units to continue a solid profit and to keep the costs in a comfortable position and keep the company’s profits. Lisa has a desire but she has to deal with her resources. In the position to obtain another model the contribution analyze has to be evaluated to decide if it will be a good alternative thus preventing to put in hazard the productivity and profits of the company.
.
References
A life-cycle cost scenario. (1999). Building Operating Management, 46(9), 1. Retrieved from http://search.proquest.com/docview/203426220?accountid=458 Hospital board mulling over hospital cost scenarios. (2008, Feb 06). Lakes District News. Retrieved from http://search.proquest.com/docview/374440121?accountid=458