Guillermo Furniture Store Budget Analysis

Page 1: John Adegoke

I decided to use Clear Hear for my revenue, cost concepts, and market structure proposal. Clear Hear is a new but growing manufacture of cell phones. Kendra Sherman, the developmental specialist has successfully secured and order for 100,000 cell phones from a major Big Box chain. Lisa Norman, the production manager for Clear Hear is eager to offload her excess capacity of 70,000 phones because her bonus is based on running the factory at full capacity. Unfortunately the Big Box chain had decided that they will not pay more the $15 dollars for each of the cell phones which are priced at $20 dollars per unit. With the delivery date in 90 days, the company must come up with a strategy to achieve profitability while keeping their overall costs down.

Clear Hear currently runs two production lines at its new factory. In the last week an Original Equipment Manufacturer (OEM) has offered to produce up to 100,000 units of the Alpha model on short term notice. They are offering a nonnegotiable $14 dollars per unit.

Manufacturing is a very complex and capital intensive venture. A manufacturing firm must first conduct a thorough economic analysis before requesting or generating a new product order. The firm must examine their manufacturing capacity as well as all the associated costs. These costs include variable costs, fixed costs, and opportunity costs. For this scenario, Clear Hear must decide whether to accept the large order from the Big Box chain. The organization must determine how their variable and fixed cost should be used to maximize their profits. If the organization refuses to work with the Big Box chain, they will need to evaluate the consequences of such a decision and they will need to identify other alternatives. At the end of this analysis, Clear Hear must determine the best alternative solution and they must make sure that their decision will help them in achieving their stated goals.

To begin we need to...