Foulke Consumer Products, Inc Case Study Analysis
Lexington Expansion
Third alternative brings out the option of expanding the Lexington facility, mainly due to its efficiency and cost reduction strategies. To make use of those capabilities, it was proposed to expand the production. By expanding the Lexington Plant; the number of units produced at Lexington would increase from 187,500 to 237,500 units, with $600,000 fixed cost and increase in $1 in each variable’s cost. Looking at the assessment, we concluded total cost that the cost that would incur, would be around $ 36,082,287.09. It is more beneficial for the company to expand Lexington instead of Orlando in order to meet the same demand as well assame production units with less cost incurrence.
Discarding Atlanta
We performed sensitivity analysis by closing Atlanta production and moving those facilities to Lexington and Orlando. We inferred after moving the Atlanta, Georgia’s production to Orlando in order to meet the demand; the units produced would expand from 225,000 to 325, 000. While at Lexington, units produced would also escalate from 187,500 to 262,500. We used solver in order to find the minimized cost and we found out that after closing Atlanta; the cost would be$ 35, 511,384, which is more than the initial objective cost. So, we recommend the company to open and run Atlanta facility, as it would be more costly to discard it and shift the production budgets to Lexington and Orlando.
Recommendations
Starting from managerial problems; Foulke Consumer Products Inc. has been providing andacquiring licenses across the country. This long-term vision sometimes let the company to have a blind eyetowards the management’s problems. Although, the production plants with autonomous powers, but in case of Orlando, where itis not producing at its full capacity, and itis more proximate to Miami;it should be sorted out before moving onto the big decision of having an expansion or growth.
To satisfy the untouched market;the scenario was suggested to run the current facilities at full capacity and producing at full capabilities. We can see that, Lexington and Atlanta are operating at full capacity, in order to cater the market demands. We can see that Orlando plant is operating at 57% operating capacity. We assume that it would be working at 100%, and the results would be$ 35,340,728.29 asminimized cost.
We assessed that Orlando plant has largest facility and it is more accessible as well as efficient to the viable markets. The Orlando plant will exceed 75,000 units and the cost of the expansion would be approximately $900,000 fixed cost, which would minimize the cost to $36,689,686.84. Later, the opportunity to expand Lexington, will increase $1variable cost and $600,000 fixed cost, while increasing the units from 187,500 to 232,500, resulting in minimized cost of $36,081,448.85. The option to expand Lexington seems more viable for the company.
Finally, we assessed the opportunity of discarding the Atlanta facility, for which we used solver to get the price of $35,510,611.22, which was more than the objective initial cost; so it would be in the best interest of the company to avoid or not discard the Atlanta and shift the burden to Orlando and Lexington...........................
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