Wgu Jgt2 Task 3 Dec 2013

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Shuzworld Western Governors University JGT2 Decision Analysis Task 3 Sneaker Manufacturing A. Shuzworld intends to launch a new sneaker for its younger customers and need a recommendation on whether to recondition the existing production line, purchase a new production line just for this shoe or outsource the work to a factory in China. The option of reconditioning the production line comes with a fixed cost of $50,000 and a variable cost of $1,000 each production of a 1,000 shoes. The option of purchasing and deploying a new production line will cost Shuzworld $200,000 in fixed cost and $500 in variable costs for every 1,000 shoes produced. The outsourcing option has a variable cost of $3,000 for every 1,000 shoes produced and zero fixed costs. The output of this data in POM for Windows is shown below. The breakeven volume required for each option can be calculated using this tool and demonstrates that 300 units would be the breakeven point for reconditioning vs. new equipment purchases, 25 units for reconditioning vs. outsourcing to China and 80 units for purchasing new equipment vs. outsourcing. This, in turn, shows that if the demand exceeds 300 units then new equipment would be a good option, if demand is between 25 and 300 then reconditioning would be a better option and for demand at or below 25 units then outsourcing would become the optimal choice. A-1. Basically the optimal choice will be dependent on the actual demand for the product. Although the company has no actual data on demand it can be expected that demand for a new product will exceed 25 units and will remain under 300 units. This assumption makes the reconditioning option the optimal choice. Another fact that will drive the choice towards outsourcing is the operating director does not like the idea of outsourcing and the added expense of purchasing new equipment is ill advisable due

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