Should you open a large or small process line

Assignment Help Business Management

Reference no: EM131258070

As operations manager of Holz Furniture, you must make a decision about adding a line of rustic furniture. In discussing the possibilities with your sales manager, Steve Gilbert, you decide that there will definitely be a market and that your firm should enter that market.

However, because rustic furniture has a different finish than your standard offering, you decide you need another process line. There is no doubt in your mind about the decision, and you are sure that you should have a second process. But you do question how large to make it. A large process line is going to cost $400,000; a small process line will cost $300,000.

The question, therefore, is the demand for rustic furniture. After extensive discussion with Mr. Gilbert and Tim Ireland of Ireland Market Research, Inc., you determine that the best estimate you can make is that there is a two-out-of-three chance of profit from sales as large as $600,000 and a one-out-of-three chance as low as $300,000. With a large process line, you could handle the high figure of $600,000.

However, with a small process line you could not and would be forced to expand (at a cost of $150,000), after which time your profit from sales would be $500,000 rather than the $600,000 because of the lost time in expanding the process. If you do not expand the small process, your profit from sales would be held to $400,000. If you build a small process and the demand is low, you can handle all of the demand. Should you open a large or small process line?

Reference no: EM131258070

Questions Cloud

Consider the role of technology : How would you handle the physical distribution of your product? Be sure to consider the role of technology in your discussion of 150-200 words

What is your break even point in dollars per month : What is your break-even point in dollars per month? - What is the expected number of meals each day if you are open 30 days a month?

Develop a finite difference scheme for solving this equation : Consider a third-order ODE of the form d3 y/dx3 = F(x, y, dy/dx). Develop a finite difference scheme for solving this equation if y = A at x = a; y = B at x = b; and dy/dx = C at x = a. Assume that F is a linear function in the dependent variable ..

Why your selection would accommodate a desirable outcome : Describe a current event within your health care organization that requires leadership attention. From your readings this week, apply a leadership theory that most closely represents your approach to addressing the situation.

Should you open a large or small process line : If you build a small process and the demand is low, you can handle all of the demand. Should you open a large or small process line?

What are labor costs in ms project : What are labor COSTS in MS project? How do we assign labor COSTS to a task in MS Project? Describe AND provide a screen shot of the steps.

Should you open a large or small process line : If you build a small process and the demand is low, you can handle all of the demand. Should you open a large or small process line?

Discuss the differences between windows and mac os : Discuss the differences between Windows and Mac OS. You may discuss any recent versions of either operating system. Compare and contrast the two, and provide arguments for choosing a PC with Windows or a Mac with Mac OS.

Solve for vertical motion until the velocity becomes zero : Solve the problem of Example 9.2 by Milne's predictor-corrector method, and compare the results with those obtained earlier by the Runge-Kutta method. Comment on the difference between the computational effort involved in the two methods.

User Account

All Pages