Clear Hear's Big Decision

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Clear Hear’s Big Decision

Michelle A. Brantley

Economics 561

August 1, 2010

Edward Robinson

Clear Hear manufacturers’ cell phones during a technologically competitive time. It has two production lines, Alpha and Beta. The unit cost for Alpha, the base unit, is $20 and the unit cost for Beta, the upgrade, is $30. The business development specialist, Kendra Sherman has acquired an order for 100,000 cell phones. The delivery request time is 90 days. Big Box, the client is only willing to pay $15 per unit. Kendra will confer with Lisa Norman, the production manager decide how to complete the order. Lisa advises Kendra that she has an excess capacity of 70,000 cell phones. OEM is the biggest competitor of Clear Hear. OEM promotes that it can produce 100,000 Alpha prototype cell phones in a short timeframe at a price of $14 per unit. Kendra and Lisa work together to create a plan that will be cost effective yet profitable. Big Box is interested in purchasing 100,000 units at a rate of $15 per unit. This presents a challenge for Clear Hear because the Alpha phone cost $20 per unit. This business proposal will identify the best way for Clear Hear to increase revenue, maximize profits, achieve ideal production levels and reduce cost.

Clear Hear has 5 options to choose from to fulfill the order. The first option is for Clear Hear to produce the 70,000 phones that are available within 90 days and pay OEM to produce the remaining 30,000 phones. The second option is for Clear Hear to try to compromise with Big Box by manufacturing the 70,000 phones within 90 days and request an extra 45 days to produce the remaining 30,000 phones. The third option is to manufacture the 70,000 phones and out source remaining 30,000 to OEM. The forth option is to allow OEM to manufacture the entire order via outsourcing because OEM is able to produce a large order of phones in a short amount of time. The final option is to decline the offer and hope for...