Industrial Grinders, N.V. has decided to start manufacturing and selling plastic rings for use in their machines. Currently, they manufacture and sell steel rings, along with the machines they also manufacture and sell through another division of the company. They recently discovered that a competitor in France will now be selling plastic rings. These plastic rings will serve the same purpose as the steel rings Industrial Grinders manufactures. However, they cost less to manufacture and they last longer. Management has decided that Industrial Grinders will now start to manufacture plastic rings. Lawrence Bridgeman, General Manager of the German plant, is tasked with …show more content…
For my time-frame estimates, I’m using 14 weeks. This study takes place in late May. I didn’t know how “late” their “late” was, so I started counting the weeks of June, July, August and the 2 weeks of September to get us to “mid-September”. I know that technically, a month has 4.3 weeks, but for the sake of rough numbers and ease of math for my non-math brain, I counted each month as 4 full weeks.
The case study said that if sales remained steady, there would still be 15,100 rings left unsold by mid-September. The problem is that the case study also said that the plant operates at 70% capacity in the summer months. If the plant is not manufacturing at 100%, I think it is safe to assume that sales are also slower than usual in those months. If sales are steady, then why is manufacturing running at a decreased pace? It wouldn’t make sense. Slower sales would lead one to believe that there would be way more than 15,100 rings left by mid-September. So continuing to manufacture and sell steel would actually cost more than the $64,584.00 mentioned in the first option. You would spend that amount manufacturing, and probably have more than 15,100 rings left unsold. Really, you end up losing more money on this option. The remaining steel is enough to produce 34,500 rings.