Brandon Production is a small firm focused on the assembly and sale of custom co
ID: 388279 • Letter: B
Question
Brandon Production is a small firm focused on the assembly and sale of custom computers. The firm is facing stiff competition from low-priced alternatives, and is looking at various solutions to remain competitive and profitable. Current financials for the firm are shown in the table below. In the first option, marketing will increase sales by 50%. The next option is vendor (supplier) changes, which would result in a decrease of 10% in the cost of inputs. Finally, there is an OM option, which would reduce production costs by 25%. 7. A) Complete the Table Below to Show your Analysis -3 Pts B) Which of the options would you recommend to the firm if it can only pursue one option?- 1 Pt C) Comment on the feasibility of each option. -1 Pt Marketing Increase 50% Decrease Input Costs x 10% Reduce Production Costs x 25% Business Function Current Value Cost of Inputs Production Costs Revenue $50,000 $25,000 $80,000 $5,000 ProfitExplanation / Answer
Option 1
Increased Revenue 80,000 * 1.50 = $120,000
120,000 – (50,000 + 25,000) = 45,000
Doublingsales is not always easy and should not be the only way to remain competitive and profitable. Cutting costs is more feasible and more controlled than increasing sales revenue for a business.
Option2: Decrease in Cost of Inputs50,000 * 0.10 = $5,000
50,000 – 5,000 = $45,000
80,000 – (45,000 + 25,000) = 10,000
Thisoption seems feasible because it does not call for a huge cut in costs and should be able to be achieved without much trouble. I would say this is one of the most feasible options
.Option 3: Reduce Production Costs25,000 * 0.25 = 6,250
25,000 – 6,250 = 18,750
80,000 – (50,000 + 18,750) = 11,250
Againthis is a more feasible option than doubling sales, but still cutting costs by ¼ is not an easy task