Assignment 2: Operations Decision Essay

914 Words Jun 1st, 2013 4 Pages
Operating Decision
ECO 550

Briefly describe the details of the fictitious business that you created for this assignment. Allentown Manufacturing Company is a family owned business that manufactures cardboard boxes. Currently, the company has a manpower rate of 100 workers that work 20 out of a month. The company has been able to last through some of the toughest economic times, but recently the AMC’s fixed cost is “high enough”, and their total costs are exceeding their total revenue.
Assess the current environmental scan factors that are relevant to the decision making process. Determine the factors that will have the greatest impact on plant operations and management’s decision to continue or discontinue operations. Provide a
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Evaluate the financial performance of the company using the information provided in the scenario. Consider all the key drivers of performance, such as company profit or loss for both the short term and long term and how each factor influences managerial decisions. Be sure to show the calculations that helped you reach your conclusions.
The total revenue is the output multiplied by the number of units produced per month: TR=$32*6,000
TR= $192,000
The monthly wages for the worker are the number of workers multiplied by the daily wage multiplied by the number of days worked in each month:
100*$70*20= $140,000
The total variable cost is daily variable input multiplied by the number of days worked in a month:
TVC=$2000*20
TVC= $40,000
Recommend how the company can improve its profitability to deliver more value to its stakeholders. Then, develop a brief plan to implement the recommendations.
Allentown Manufacturing Company can improve its profitability in a variety of ways, such as expanding into new markets sectors, or developing new products or services. Some major changes that can take place to improve profitability can be to reduce manpower or scale back on working hours, reducing costs, and increasing productivity and efficiency. I think AMC should work with their top management to create a partnership with another company to begin manufacturing a

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