- Published: September 26, 2022
- Updated: September 26, 2022
- Level: Intermediate School
- Language: English
- Downloads: 3
CASE 1 WAGNER FABRICATING COMPNAY. docx
Theodore Greenberg October 22, 2008 Wagner production analysis Should investment capital be used to create increase production of Part(p) now ordered from outside sources. Gross savings on production at a price of 17 $ versus 18 $ would result in a savings of 12853 $ however after allowing for 2 week inventory safety margin backup supply the savings would be decreased by 4250$ with holding and insurance costs continuing. If investing in this new production is solely based on the production of part p we would not advise investing in increased production facilities.
However it has been determined that out of the 250 day work year 22 cycles or production runs would need to be made keep a steady production utilization intake/output ratio. Exact production details were not given to us, but we cannot for see more than 150 days of production time being used leaving 100 days for a part p1 to be produced making the new facility truly profitable.
We also advise that production/order levels for at least year 1 of production should be started at 50% to make appropriate quality testing and this can be increased to 100% if all goes well
Analysis of production versus purchasing Wagner manufacturing
holding costs
Costs
post production
Change
inventory insurance and tax
24000
-2312
9. 63 % savings
damages
9000
0
no change
utilities
15000
0
no change
savings on holding
-2312
-2312
savings on purchashing
laborx2hrs
50 purchases/year
28
56
-2800
materials for purchase = 50/125
50/125*2375
-950
Total purchasing costs
-3750
-3750
Purchasing and holding savings
-6062
production setup and cost
labor x8hr
21. 33 runs/year*
50
400
8533
ordering 0 parts
0
producing 3200
17
3200
54400
62933
62933
producing 3200 with holding &purchasing savings
50809
ordering 3200
18
3200
57600
purchasing and holding costs
6062
Total purchasing costs
63662
safety margin = 2 weeks of runs
17
250parts
-4250
adjusted production savings
8250
gross savings
12853
* in the worked in this abstract we expect 8hr per cycle to setup equipment for production run
