Bedrock Corporation is a highly diversified company that operates in Canada, United States and Europe. The Canadian operations both manufactures and imports numerous products. The Canadian operation has divisions, and within each division is responsible for a group of related products. As a full – line supplier the product lines meet varying needs within the corporation, some being market leaders and other filling out total offering. One of the product that the corporation produces is an item that is called “desk caddy”, which was designed 15 years ago and the only thing that changes that were introduce was different colors. It has become an urgent matter because the mold used to produce the desk caddy has worn out rather unexpectedly.
The marketing manager has to make a decision. Either to keep manufacturing the old design desk caddy or begin manufacturing a new prototype of the desk caddy. If a new design of the desk caddy is considered, and there is only enough money to buy and replace one mold which will cost $80,000.The option of buying two molds (old and new design) and produce both desk caddies in house is not available, and a decision has to be made as soon as possible because the is only three weeks remaining life of the old design of the desk caddy.
Addressing the main issue and alternatives of the old design desk caddy and the new design desk caddy. First one is creating a new design with the new prototype mold. Second outsourcing the old mold while in-house producing the new mold. Third outsource the new mold and in-house producing the old mold. Forth is combining the old mold and new mold or outsourcing to have the product produce.
Old mold vs. new mold - in house producing old mold - outsource new mold to be produced.
Old mold vs. old mold - producing in house old mold. - outsource produce old mold
New mold vs. new mold - in house produce new mold - outsource produce new mold
New old vs. old mold - in house produce new mold - outsource will produce the old mold.
Deciding which mold to use old mold considering the cost and revenue of producing with the old mold in-house or outsourcing.
Exhibit 1 Caddy current of the old mold for in-house with units of 113,334, shows the column for this year domestic sales of $510, 003.00 minus total operating cost of $405,001.50 and having a profit of $105,001.50. The column of cost -$0.20 is without amortization domestic sales of $510,003.00 minus total operation cost of $384,601.38 with a operation profit of $ 125,401.62. Column cost + $0.20 with amortization shows domestic sales of $510,003.00 minus total operation cost $425,401.62 with a profit of $84,601.38.
Exhibit 2 Caddy Current for this year outsource the old mold shows domestic sales of $510,003.00 minus Total operation cost $484,335.30 with a profit of $25,667.70.
The decision shows using the Old mold
Exhibit 1 using the old mold and producing in-house show a profit even when using amortization or without amortization there is still a profit.
Exhibit 2 for outsourcing show a profit of $25,667.70 which is much less than if done in-house.
Deciding which mold to use new mold have to consider the cost and revenue of producing with the new design in- house or outsourcing
Exhibit 1 Caddy New for in-house with units of 113,334, shows the column for this year the domestic sales of $89,336.80 minus total operating cost of $411,110.85 and having a profit of $178,225.95. The column of cost -$0.20 is without amortization domestic sales of $589,336.80 minus total operation cost of $388,888.65 with a operation profit of $200,448.15. Column cost + $0.20 with amortization shows domestic sales of $589,336.80 minus total operation cost $433,333.05 with a profit of $156,003.75. Exhibit 2 Caddy New for this year outsource…