Cost Scenario Case Study Example | Topics and Well Written Essays - 750 words

Cost Scenario - character Study ExampleBalance 30,000 may be outsourced to the OEM at US$14. Here again, the variable terms has to be reduced to US$5. Lisa Morgan will forfeit the larger part of her bonus, but she will bring forth some bonus for running the factory at capacity.ClearHear appears to be losing out collectable(p) to underutilization of capacity. ClearHear must operate on costing based on volumes so that they have clear prices to offer on twisting orders like the present order.There is maximum risk potential when the order is outsourced. The OEM has good track lay on delivery and has won several quality awards for its manufacturing processes. However, once the order is outsourced to this OEM, the risk potential exists until the goods atomic number 18 delivered.Internally too, there is risk potential due to decrease in the amount of variable cost. Nevertheless, due to the volume of the order, there is the possibility of reducing the variable cost without compromis ing quality.In my opinion, Option 2 is the best alternative solution. This is the only option for ClearHear to get the job done through and through a certain OEM at a cost it basisnot manufacture the cell phones. The problem of acting against the companys contention of values exists in this option. ... It would be better if the variable cost can be reduced further to US$4.In option 2, the order is outsourced to an OEM. The OEM is reliable and has its own manufacturing facilities. The OEM is as good as ClearHear, or even better, where product is concerned. Risk AnalysisThere is maximum risk potential when the order is outsourced. The OEM has good track designate on delivery and has won several quality awards for its manufacturing processes. However, once the order is outsourced to this OEM, the risk potential exists until the goods ar delivered.Internally too, there is risk potential due to decrease in the amount of variable cost. Nevertheless, due to the volume of the order, t here is the possibility of reducing the variable cost without compromising quality.Risk factor can happen through any unforeseen event, acts of God, contingencies, etc. Recommendation of the best alternative solutionIn my opinion, Option 2 is the best alternative solution. This is the only option for ClearHear to get the job done through a reliable OEM at a cost it cannot manufacture the cell phones. The problem of acting against the companys statement of values exists in this option. However, this has to be balanced against cutting down on variable costs and increase risk of encountering loss in the event the variable cost cannot be brought down to US$5 (Opportunity Cost).Outsourcing is valuable and valid and this option must be exercised when other options fail to satisfy the vexation needs. The business exists to make profits. It does not make sense to reject the order due to inability to hold on to companys statement of values. It is possible to keep the employees working by se curing orders where the prices do not have to be weakened (Cost Concepts).ConclusionThere is