Assignment 2: Operations Decision Essay

Words: 896
Pages: 4

Operating Decision
ECO 550

Briefly describe the details of the fictitious business that you created for this assignment. Allentown Manufacturing Company is a family owned business that manufactures cardboard boxes. Currently, the company has a manpower rate of 100 workers that work 20 out of a month. The company has been able to last through some of the toughest economic times, but recently the AMC’s fixed cost is “high enough”, and their total costs are exceeding their total revenue.
Assess the current environmental scan factors that are relevant to the decision making process. Determine the factors that will have the greatest impact on plant operations and management’s decision to continue or discontinue operations. Provide a
…show more content…
This will allow the company to save money on wages, employment taxes, and employment insurance such as workman’s compensation and unemployment insurance. Increasing productivity is a solid way to increase profitability. If the plant is able to acquire larger orders of boxes, this will in turn cause them manufacture a larger amount of boxes. Management would also have to decide the best way to train the workforce to work in a more efficient manner, decide whether or not it is feasible to purchase additional machines to increase the production and develop a proper training program to develop the workers’ skillset.
Assess the circumstances in which the company should discontinue operations and how management should react when confronted with these circumstances. Provide a rationale with your response. The circumstances in which Allentown Manufacturing Company should discontinue their operations, is when their total costs surpass their total revenue. The company will not be able to maintain production or meet their cost demands such as salaries, materials, maintenance, etc. if they are constantly spending more money than they are making. Management should react in a manner that is in the best interest of the company and not themselves. If the manager or managers are not able to develop a solid plan to match or pass the total costs that company is hitting each month, than the most feasible thing to do would be to shut the plant down. By continuing