Scenario: You are the Sales Director at a manufacturing company which produces porcelain hand made collectible...

 

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Scenario: You are the Sales Director at a manufacturing company which produces porcelain hand made collectible dolls in its sole manufacturing plant based in Wisconsin. You are called in for a meeting with the CEO of the company. At the meeting, the CEO informs you that he has reviewed a report prepared by the marketing department which states that there is an increased demand for the dolls since J'Lo went public about her private collection. The marketing department is projecting that sales can be increased by 25% worldwide next quarter. The CEO is very excited about the opportunity to increase sales and is hoping that the growth will further encourage investors to purchase the company's stock; after all, his job security and year-end bonus is determined by the company's market performance. The CEO is expecting that the short-term increase in sales, due to J'Lo's disclosure, will also lead to long-term growth in sales as other consumers also become collectors once they see the quality of the product. He is confident that the company's sales can rival the Barbie doll era. He emphasizes how the dolls are more representative of today's average woman, which he believes will be all the rave with mothers. As the Sales Director, you are excited since you will also receive bonus compensation as a result of the additional sales. The CEO tells you to ensure that production of the dolls is increased in order to meet the increase in sales next quarter. You assure the CEO that the dolls will be ready. Other Facts: Other Facts: § The dolls are manufactured in a 3 step process as follows: i. Porcelain is formed into the head, arms and legs by workers utilizing molds at Station A, it is a quick process as workers are very efficient at the task, next, ii. for 3 hours, next, iii. The porcelain body parts are attached by hand to a cotton body at Station B, it is a bit more labored than forming the body parts because the dolls are hand stitched together, then, The porcelain body parts are put into a machine to curate and cool iv. The completely assembled dolls are sent to Station C where artisans hand paint the dolls' human features. § The manufacturing plant at normal capacity can produce 400,000 dolls per year. The company is currently producing and selling 382,000 dolls per year. $ The machinery used in the plant has an average of 5 years of life remaining. The normal life expectancy for the equipment, which was a major capital investment of nearly Bour for § The machinery used in the plant has an average of 5 years of life remaining. The normal life expectancy for the equipment, which was a major capital investment of nearly $10,000,000, is 20 years. New machinery is more advanced which will allow for I increased efficiency in the production process but cost on average 20% more than the current machinery. § Sales price per doll is $1,500 § Increasing production will result in a need for more artisans which has traditionally been very challenging. In order to attract more artisans, they potentially will need to increase the hourly wage rate. § As a result of increase demand for porcelain and recently imposed tariffs, the cost of the porcelain needed for production has increased by 5%. The company can avoid the cost increase by using another substitute material and no one would be able to detect the difference. The new material would actually make the dolls less fragile. § Increasing the sales volume may result in a decrease in contribution margin at a minimum in the short run but the company will still be profitable. Requirements: Do you recommend that the company increase its production? Or do you recommend one of your provided alternatives listed under requirement 3 above? Explain your answer. (6 to 8 sentences) 5. Scenario: You are the Sales Director at a manufacturing company which produces porcelain hand made collectible dolls in its sole manufacturing plant based in Wisconsin. You are called in for a meeting with the CEO of the company. At the meeting, the CEO informs you that he has reviewed a report prepared by the marketing department which states that there is an increased demand for the dolls since J'Lo went public about her private collection. The marketing department is projecting that sales can be increased by 25% worldwide next quarter. The CEO is very excited about the opportunity to increase sales and is hoping that the growth will further encourage investors to purchase the company's stock; after all, his job security and year-end bonus is determined by the company's market performance. The CEO is expecting that the short-term increase in sales, due to J'Lo's disclosure, will also lead to long-term growth in sales as other consumers also become collectors once they see the quality of the product. He is confident that the company's sales can rival the Barbie doll era. He emphasizes how the dolls are more representative of today's average woman, which he believes will be all the rave with mothers. As the Sales Director, you are excited since you will also receive bonus compensation as a result of the additional sales. The CEO tells you to ensure that production of the dolls is increased in order to meet the increase in sales next quarter. You assure the CEO that the dolls will be ready. Other Facts: Other Facts: § The dolls are manufactured in a 3 step process as follows: i. Porcelain is formed into the head, arms and legs by workers utilizing molds at Station A, it is a quick process as workers are very efficient at the task, next, ii. for 3 hours, next, iii. The porcelain body parts are attached by hand to a cotton body at Station B, it is a bit more labored than forming the body parts because the dolls are hand stitched together, then, The porcelain body parts are put into a machine to curate and cool iv. The completely assembled dolls are sent to Station C where artisans hand paint the dolls' human features. § The manufacturing plant at normal capacity can produce 400,000 dolls per year. The company is currently producing and selling 382,000 dolls per year. $ The machinery used in the plant has an average of 5 years of life remaining. The normal life expectancy for the equipment, which was a major capital investment of nearly Bour for § The machinery used in the plant has an average of 5 years of life remaining. The normal life expectancy for the equipment, which was a major capital investment of nearly $10,000,000, is 20 years. New machinery is more advanced which will allow for I increased efficiency in the production process but cost on average 20% more than the current machinery. § Sales price per doll is $1,500 § Increasing production will result in a need for more artisans which has traditionally been very challenging. In order to attract more artisans, they potentially will need to increase the hourly wage rate. § As a result of increase demand for porcelain and recently imposed tariffs, the cost of the porcelain needed for production has increased by 5%. The company can avoid the cost increase by using another substitute material and no one would be able to detect the difference. The new material would actually make the dolls less fragile. § Increasing the sales volume may result in a decrease in contribution margin at a minimum in the short run but the company will still be profitable. Requirements: Do you recommend that the company increase its production? Or do you recommend one of your provided alternatives listed under requirement 3 above? Explain your answer. (6 to 8 sentences) 5.

Answer rating: 100% (QA)

Based on the information provided I recommend that the company increase its production in order to meet the projected demand Although there may be a d... View the full answer