Reference no: EM133030960
QUESTION - Uptown Sdn Bhd is a company located in Melaka specialises in manufacturing of calculator. The company famous products are two models of pocket calculator that is Basic model and Scientist model. The Basic model is sold for RM20 each, has a direct material cost of RM5 and requires 0.25 hours of labour time to produce. The other model, the Scientist, sells for RM30 each, has a direct material cost of RM6.50 and requires 0.375 hours to produce.
Due to the covid 19 pandemic crisis the company is facing a shortage of labour. The labour, of the company is paid at RM24 per hour and currently very scarce. The existing labour has been working at full capacity. At the same time, the demand for the company's calculator is increasing. The company is currently producing 8,000 units of the basic model and 4,000 units of the Scientist model per month, while fixed costs are RM96,000 per month.
An overseas customer Texas Corporation has offered the company a contract, worth RM140,000 to supply to them a new model of pocket calculator similar to what the company produced but with certain modification and the new model is called Scientific. Due to the contract from the overseas supplier the company has made a research and discovered the following cost to be incurred:
The labour time for the contract would be 1,200 hours.
The material cost would be RM36,000 plus the cost of a special component XX1.
Special component XX1 is not normally used in the company's models. It could be purchased from a supplier for RM10,000 or alternatively, it could be made internally for a material cost of RM4,000 and additional labour time of 150 hours. Required: a) In making decision, manager need to consider uncertainty elements, when there are many unknowns and no possibility of knowing what could occur in the future that might alter the outcome of the decision.
Required -
a) Explain briefly three (3) ways on how manager may deal with uncertainty in decision making.
b) i) Analyse which model of the calculator should be reduced by the company to accommodate the special order from the overseas customer.
ii) Advise the company whether to buy the special component XX1 from the supplier or to make it internally.
c) Based on your answer in part (b) above, evaluate the special-order contract from the overseas customer (Texas Corporation).
d) Although quantitative factors are important in decision making, managers should not over-look the importance of qualitative factors in decision making. Propose three (3) qualitative factors that should be considered in analyzing the contract for oversea customer.