Danou Corporation manufactures various types of artificial nails in a highly automated plant. The product market...

  

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Danou Corporation manufactures various types of artificial nails in a highly automated plant. The product market competition for artificial nails is fierce. The substitutes on the artificial nails market are comparable in terms of characteristics and value. Danou believes that providing low-cost products without sacrificing quality is important to achieving its target profitability. For 2021, Danou plans to achieve this goal by enhancing yields and mitigating defects in its manufacturing operations. Danou will train workers and encourage them to undertake the necessary initiatives. Currently, a significant amount of Danou's capacity is devoted to the production of defective products with no sales value. Danou expects that improved yields will release come manufacturing capacity. However, Danou does not anticipate that this improvement will automatically translate to lower costs due to the existing inflexible cost structure. To reduce unit fixed costs, Danou could lay off (low-skilled) employees and sell redundant equipment, or it could utilize the spare capacity to produce and sell more of its current products or improved models of its existing product portfolio. Danou's balanced scorecard (initiatives omitted) for the just-completed fiscal year 2021 follows. Objectives Financial Perspective Increase Shareholder Value Customer Perspective Increase Market Share Internal-Business Process Perspective Improve Manufacturing Quality Reduce Delivery time to Customers Learning-and-Growth Perspective Develop Process Skills Enhance Information-System Capabilities Measures Operating-income changes from productivity improvements Operating-income changes from growth Market share in colour laser printers Yield Order-delivery time Percentage of employees trained in process and quality management Percentage of manufacturing processes with real-time feedback Target Actual Performance Performance £2,100,000 £2,600,000 5% 89% 24 days 93% 89% £ 140,000 £1,400,000 4% 91% 21 days 94% 93% d) What challenges, if any, do you recognize in Danou improving quality and significantly downsizing to eliminate unused capacity? (7 marks) Danou Corporation manufactures various types of artificial nails in a highly automated plant. The product market competition for artificial nails is fierce. The substitutes on the artificial nails market are comparable in terms of characteristics and value. Danou believes that providing low-cost products without sacrificing quality is important to achieving its target profitability. For 2021, Danou plans to achieve this goal by enhancing yields and mitigating defects in its manufacturing operations. Danou will train workers and encourage them to undertake the necessary initiatives. Currently, a significant amount of Danou's capacity is devoted to the production of defective products with no sales value. Danou expects that improved yields will release come manufacturing capacity. However, Danou does not anticipate that this improvement will automatically translate to lower costs due to the existing inflexible cost structure. To reduce unit fixed costs, Danou could lay off (low-skilled) employees and sell redundant equipment, or it could utilize the spare capacity to produce and sell more of its current products or improved models of its existing product portfolio. Danou's balanced scorecard (initiatives omitted) for the just-completed fiscal year 2021 follows. Objectives Financial Perspective Increase Shareholder Value Customer Perspective Increase Market Share Internal-Business Process Perspective Improve Manufacturing Quality Reduce Delivery time to Customers Learning-and-Growth Perspective Develop Process Skills Enhance Information-System Capabilities Measures Operating-income changes from productivity improvements Operating-income changes from growth Market share in colour laser printers Yield Order-delivery time Percentage of employees trained in process and quality management Percentage of manufacturing processes with real-time feedback Target Actual Performance Performance £2,100,000 £2,600,000 5% 89% 24 days 93% 89% £ 140,000 £1,400,000 4% 91% 21 days 94% 93% d) What challenges, if any, do you recognize in Danou improving quality and significantly downsizing to eliminate unused capacity? (7 marks)

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Improving quality and significantly downsizing to eliminate unused capacity can present several chal... View the full answer