Unit 3 Written Assignment

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Unit three Written Assignment

Cheryl L. Jones

MT435 Operations Management

Kaplan University

13 October 2012


Question One

Based on the information presented in the scenario/case study discuss Albatross Anchor’s competitiveness in relation to (please address all items in the below list and provide support for your conclusions):

1. Cost

a) Cost of Production:

Current manufacturing costs are $8.00 per pound for mushroom/bell anchors and $11.00 per pound for snag hook anchors. Albatross Anchor charges the same per unit as their competitors. However, the profit margin can sometimes be as much as 35% less (on some of the anchors) because of operations inefficiencies.

$8 per pound for mushroom/bell anchors

$11 per pound on for snag hook anchor

b) Economies of Scale in material purchasing:

The firm is not able to realize economies since they are not able to produce larger orders as easy. They are not able to meet capacity utilization within the plant due to operational inefficiencies. They can only produce small batches. Scale economies have brought down the unit costs of production and have fed through to lower prices for consumers. Economies of scale are a key advantage for a business that is able to grow. Most firms find that, as their production output increases, they can achieve lower costs per unit. Economies of scale are the cost advantages that a business can exploit by expanding their scale of production. The effect of economies of scale is to reduce the average (unit) costs of production.

c) Cost of Raw Materials Sitting Idle in the Warehouse:

The raw materials sit idle until they are ready to ship out which leads to large cost of holding raw material in inventory.

d) Cost of Finished Goods Sitting Idle in the Warehouse: They are able to ship out finished products effectively.

2. Speed of manufacturing process from order to finished product.

The speed of manufacturing process from...