Albatross Anchors Essay

1148 Words5 Pages
KU Consultant Firm Carl Chatman MT435 Operations Management Kaplan University 1 July, 2015 Introduction The purpose of this proposal is to ensure that Albatross Anchor’s makes a sound business decision about cost, speed, flexibility, technology, capacity and service to customers. It will also conduct an analysis to determine Albatross Anchor’s most cost effective break-even point of the company. Cost The cost of manufacturing at Albatross Anchor is $8.00 per pound for mushroom/bell anchors and $11.00 per pound for snag hook anchors, which is the same amount the competitors charge. The problem of Albatross Anchor does not lie with the pricing, but it lies with the fixed costs of housing all departments in one location. The housing of all departments in one location offers both an advantage and disadvantage, but I would have to say that the disadvantage outweighs the advantage. The housing of all departments in one location brings down the profit margin and causes them to see a lesser profit. Since the competitors aren’t housing all departments in the same location they will see a larger profit. This also means that Albatross Anchor is unable to reduce their costs. An economy of scale is the reduction in long-run average and marginal costs arising from an increase in size of an operating unit. It can be external or internal; external will increase the productivity of the industry and will result in a reduction of costs and internal is related to the shift in average production costs for a business as it boosts its overall product output and the average cost per unit falls until maximum efficiency is attained. Albatross could save money if they bought items in bulk but since they make items as orders are received, the items would sit in the warehouse and take up space that would be used quicker. It is very expensive to store raw materials because
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