Cost Scenario

Cost Scenario Carlos Quintana University of Phoenix ECO/561PR Economics Puerto Rico Dr. Maria Gauider-Diez April 26, 2012

Cost Scenario 2 Cost Scenario Through the next essay will be studying the cost scenario simulation of San Juan Cell Phones (Phoenix, 2012), a Company based in San Juan, Puerto Rico dedicated to the sale of mobile phones. This scenario involves Maria Perez, a developer of business development specialist for the company and production manager Lisa Norman in San Juan Cell Phone. The simulation shows the need for the company to sell to Big Box 1000.000 cell phones as they have a promotion with a telephone service provider. Mrs. Jones has secured the sale but the simulation presents the following situation. There is an excess of 70 thousands units in the inventory of San Juan Cell Phone, there is a need to manufacture an additional 30,000 units to comply with Big Box. There are two ways to make the sale. Use the production line which is producing the Beta phone model which costs the company about $ 22 to produce, that leaves a profit of $ 8 per unit. The beta model has a more expensive production cost. Within this scenario San Juan Cell Phone could change this line of production for a given period time in a short term to meet the demand of 30,000 units to meet the quota of 100,000 units that Big Box has requested. The second alternative that San Juan Cell Phone have is to use the OEM company to produce the model that meets the same specifications that the Alpha product of San Juan Cell Phone. The OEM business has the capacity to produce 100,000 units in a short term. This alternative will allow San Juan Cell Phone to continue to have an excess of the Alpha model to continue to meet the demand likely to have the product on the market.

Cost Scenario 3 The Alpha product has a cost for San Juan Cell Phone of $ 17 per unit. The same is sold at a cost of $ 20 which generates a profit of $ 3 per unit. On the other hand producing the Alpha model using the OEM company would cost San Juan Cell Phone about $ 14 per unit. This OEM price is not negotiable. If we compare the costs and benefits of these two alternatives there are several possible angles in order to maintain sales of 100,000 units. For one thing San Juan Cell Phone has an excess of 70,000 units at a cost of production of $ 17. On the other, it has the opportunity to acquire 100,000 units of the OEM at a cost of $ 14 which would allow it to sell to Big Box the product at $15 dollars and obtain a profit of $ 100,000 at a rate of one dollar per unit. There is a risk if San Juan Cell Phone decides to sell to Big Box the excess inventory. This is because there is a shortfall of two dollars if the company decides to sell the excess inventory to Big Box. On the other hand the production line using the beta product for the manufacture of the remaining 30.000 would result in a decrease in Beta models that although they cost more to be produced are still the leading product of the company. If we make a risk assessment we can clearly identify the need for the company to maintain professional relationships with wireless telephone companies that have a presence in the wireless industry. San Juan Cell Phone could sacrifice their excess inventory at a profit without taking into consideration to maintain a working relationship with Big Box. On the other hand San Juan Cell Phone is the need to produce profits, so that is the purpose of any company. On the other hand not to use the OEM company could jeopardize the working relationship with Big Box whenever the OEM company could make an approach to Big Box and agree with this it would cancel any potential business with the Undertaker.

Cost Scenario 4 That is why we understand and recommend the best option you have San Juan Cell Phone is the company hiring the OEM to produce 100,000 units need Big Box. This will maintain professional relationships with the company. At the same, time minimizing the risk that the firm achieves OEM agreements with the company Big Box. This recommendation has gain for San Juan Cell Phone whenever their production lines remain unchanged and will continue to produce their products to meet demand with their products. San Juan Cell Phone can and will establish a sales strategy to get out of their excess inventory. We understand that the above recommendation will help San Juan Cell Phone maintain a satisfactory balance in their sales department.

Cost Scenario 5 Reference University of Phoenix. San Juan Cell Phone Cost Scenario Simulation Retrieved from: www.ecampus.phoenix.edu

Cost Scenario 6 CERTIFICATE OF ORIGINALITY I certify that the attached paper is my original work. I am familiar with and acknowledge my responsibilities, which are part of the University Of Phoenix Student Code Of Academic Integrity. I affirm that any section of the paper which has been submitted previously is attributed and cited as such, and that this paper has not been submitted by anyone else. I have identified the sources of all information whether quoted verbatim or paraphrased, all images, and all quotations with citations and reference listings. Along with citations and reference listings, I have used quotation marks to identify quotations of fewer than 40 words and have used block indentation for quotations of 40 or more words. Nothing in this assignment violates copyright, trademark, or other intellectual property laws. I further agree that my name typed on the line below is intended to have, and shall have, the same validity as my handwritten signature.

Students signature:

Carlos A Quitnana Rojas

Cost Scenario 7