Results (
Thai) 1:
[Copy]Copied!
Warwick Supplies is planning to expand into Europe. It is considering a number of options,each of which has a fixed annual payment (for rent, electricity, and other overheads) anda variable cost that depends on throughput (handling, depreciation, staff, and so on). Thefollowing table shows a simplified view of these costs.A exporting from existing facilities g800,000 g900B using a local distributor g2,400,000 g700C open a facility for local finishing g9,000,000 g520D open limited production facilities g8,000,000 g360E open larger production facilities g12,000,000 g440Alternatively, Warwick can avoid entering the market by licensing a local manufacturer tomake the product in return for a royalty of about 2% of sales. How might it approach thisdecision, if it is planning on selling about 10,000 units a year with a contribution to profitof 10%?We have a limited amount of financial information, and can use this for a break-evenanalysis. You can see from Figure 5.1 that alternatives C and E are never cheapest. Thisleaves a choice between alternatives A, B and D.■ Alternative A is the cheapest for throughput, X, from 0 until:800,000 + 900X = 2,400,000 + 700X or X = 8,000Alternative Fixed cost Variable costSolution
Being translated, please wait..
