Brief 5 Dejan Lazaroski Essay

The unit sustains properly with maintenance and also improves the performance and increases the lifespan. The costs that are involved in costly

ML had developed a policy of selling manual machines and renting automatic machines. Manual machines did not cost much, did not require service, and could be modified to attach different fasteners inexpensively. Automatic machines were rented on an annual basis because they would have been more expensive to sell and it provided annual income to ML. However, about 700 of the rented machines were returned each year. During the time that machines were in inventory, ML would modify the machines to attach different fasteners. This was expensive with an average cost per modification of $2000. If all 700 machines were modified during a given year this would have cost $1.4 million per year. It was also industry practice to provide preventative maintenance and

In this case study, production planning of MacPherson Refrigeration Limited (MRL) for the next year is conducted. In order to

Keep using the old machine incurs higher cost(higher EAA) than replacing it with the new one. Therefore assuming sales are equal for both cases, when sales is smaller than 328338.07 and greater than 434036.67, Fonderia di Torino S.p.A should definitely replace the old machine with the new automated machine.

Based on the current operating report, the plant is missing the targeted production line with a shortfall of 10%. Even with a 90% production rate for the first three months of the contract, the plant is not meeting the expected $100,000 profit budget and is operating at a loss of $672,000 (over the expected $90,000 expected profit budget based on the 90% production rate). Based on current modeling, this is a significant loss of profits. Danshui Plant No. 2 needs to formulate an aggressive production schedule and profit modeling for the remaining 9 months of the contract to meet the contract required, to avoid significant profit losses during the term of the contract, and satisfy the Apple Corporation to gain future contracts.

The main difference between investing in the Zinser machine and maintaining the status quo is an initial investment of $8.25 million and the receipt of $608,000 in after-tax sales proceeds from selling the existing machine. Additionally, there is an initial $50,000 ($32,000 after-tax) cost for training employees, but this cost is only incurred once (see exhibit 3). In their first year using the Zinser machine there will be a 5% decrease in sales volume, but selling price will increase 10%. Material costs per pound will be the same as the status quo, but conversion costs will decrease to $0.4077 per pound per year due to lower power, maintenance and return costs. Days of inventory held will also drop to about 20 days. All other assumptions are the same as the status quo. In this scenario, the NPV of the Hunter Plant is about $15.87million if Aurora invests in the new Zisner machine (see exhibit 3).

All investments in short- and long-term assets will be liquidated and the proceeds will be received (recorded) in year 11. Investments in working capital will be recovered at cost. It is estimated that the trucks could be sold for $200,000 and the equipment for $120,000. The depreciation method to use is the MACRS under which the trucks qualify as a 5-year property and the equipment as a 7-year property (Table 7.4 in “Chapter 7: Making Investment Decisions with the NPV rule” (chapter page 152) presents the respective percentage to use for MACRS). There are also start-up costs (expenses) in the amount of $50,000 during the first year of operations. Cost of good sold has two components: (1) a fixed component as presented in table A below and reflects salaries (does not include depreciation) and a variable component. The variable part of cost of goods sold (CGS) is estimated to 30% of sales in each year. In addition, the company will incur in Selling and Administration (S&A) expenses. S&A includes advertising, promotions, sales and distributor salaries, and other direct personnel salaries and S&A also has to

ABC Company is planning to introduce the new product line which would utilize the spare manufacturing capacity. The product line will add up additional raw material, more time intensive labor but it will also provide higher revenue and gross margin to reach growth targets. The product will need advertising and sales promotion activities to promote customer awareness. The company will have to plan strategies satisfying the competition in market. As the product is new, initially it will cost more, the company should analyze other revenue sources to meet the cost of expansion. The risk that should be taken into consideration with the project would be the ability to have an adequate cash flow to justify the $42,000- investment for the equipment purchased.

The cost for machinery in setting up the machine is very high initial cost, included manufacturing plant as well as the cost of transportation has reduced the margin of profit (Baharudin, Wahid, 2006). However, IBS has demonstrated that the savings in the construction time is able to compensate the higher construction cost incurred (Baharudin, Wahid, 2006).

Make a simple adjustment by recalculating the depreciation from five years to ten years. Since the machine is paid, the depreciation really does not matter.

The number and timing of capital replacements of systems or products depend on the estimated life of the system, so replacement cost must be calculated in also. It is helpful for companies to use the same sources that provide cost estimates for initial investments to obtain estimates of replacement costs and expected useful lives (Blanchard, 2004).

Particular attention to future proofing, look at budgets and costings for machinery lifeline compared with costs.

According to previous information for this firm the factors that will have the greatest impact on plant operations are workers, maximum outputs, labor time, and variable costs. Currently, the managing consultant will work with special attention in the

On the off chance that costs, unit costs, deals blend, working proficiency, or other significant components change, then the general CVP investigation and connections additionally should be adjusted. On account of these suppositions, cost information are of constrained

Fourthly, the possibility of scope bias is acknowledged by the researcher, as the study only included two primary research databases. A wider research scope including other primary research databases may have yielded applicable articles, which could influenced the findings of this review.