Moon Micro

1274 Words6 Pages
Moon Micro is a small manufacturer of servers in Santa Clara, California. Lately, the demand for servers has increased, and the company needs to find a way to capitalize on the situation. The current plant has reached capacity of 10,000 units. The two options to capitalize on the situation are to either expand the plant to a capacity of 20,000 units or outsource the process to Molectron, an independent assembler.
Expanding the Santa Clara plant would have an annualized fixed cost of $10,000,000 plus $500 labor per server. Hiring Molectron would cost $2000 per server built plus the $8000 for raw materials. Moon Micro sells its servers for $15,000. Given the situation, Moon Micro wants to have projections for the next two years. For both
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Lead time could be important because if demand was too high, for example, Moon Micro could have a huge problem because Molectron might not have the proper staff to keep up and have the servers shipped to Moon Micro to be checked. There is also the possibility that the residence in Santa Clara becoming unruly because Moon Micro didn’t expand the plant which could’ve led to more jobs in the city. A giant snowball effect could occur. If Moon Micro felt like the best decision was to expand the plant, factors such as property taxes and extra plant maintenance would need to be considered. Tax rates can always rise and that leads to a variable price that could potentially be very volatile for a small manufacturing company. Some positives that could arise from outsourcing the work to Molectron to manufacture the product besides the overall net profit, is that this could free up some space in the plant at Moon Micro and possibly allowing the company to focus on another product if they wanted to do so. If Moon Micro decided to come up with another product they would still be known as a great company that produces servers because they have Molectron
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