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QUESTION

1. On what dimensions does WORLD KITCHEN's Pyrex product line/brand compete? In other words, what are the OQ/OW of WORLD KITCHEN's products?

Execution

Costs that differentiate a well-run facility from a poorly run facility

· Labor productivity

· Facility utilization

· Defect rates

· 

2.    Assume that the Charleroi plant and suppliers A through G are able to operate at 100% capacity (for an apple to apple comparison). How do the estimated price per pound in Exhibit 5 change given this assumption? Show the comparison of all 7 suppliers and WORLD KITCHEN for total price per pound, which includes variable cost, fixed cost at 100% utilization, tariffs, and freight cost per pound.

           For example, WORLD KITCHEN at 100% utilization,

a.    Variable cost per pound = $0.930 x 42% = $.391

b.    Fixed cost per pound = $0.480 ($0.539 at 89% utilization)

                      Total annual fixed costs: (47,000,000 * .89) * ($.930 * .58) = $22,563,102

                      $22,563,102/47,000,000 = $0.480

c.    Total cost per unit = $0.871

d.    Tariffs cost per pound = $0 = $0.871 x 0%

e.    Freight cost per pound = $0.0025

f.     Total price per pound = $0.873

Do this calculation for the supplier A through G and prepare a table of comparison.

Prepare a chart showing the three costs per WORLD KITCHEN and seven suppliers: original quote, total cost per unit at 100%, total price per pound including tariffs and freight.

3.    What factors beyond your analysis in question 2 should WORLD KITCHEN consider in determining whether to manufacture the Pyrex products in the Charleroi plant or to source them from a supplier?

4.    Given your responses to questions 1-3, what would you recommend WORLD KITCHEN ultimately do, and why? Give at least three options with supporting justifications.

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