Guillermo Navallez is from the beautiful state of Sonora, Mexico. In Sonora is one of the largest furniture manufactures. Guillermo has been working in the furniture business for many years. Since Sonora has a big selection of timber it has helped to create different styles of furniture. Labor is inexpensive and Guillermo has priced his furniture for the quality of the design. As time pass there changes in the business and Guillermo has seen this effect his business. By all the changes that where happening Guillermo saw his profits go down and cost go up. Now Guillermo has to look at his choices he has to make to be able to compete (University of Phoenix, 2013).
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While talking to some of his distributors Guillermo found out that there was another competitor from Norway. This company has been looking for a way to distribute their products in North America. This company does not operate in furniture outlets instead they rely on chain distributors. Guillermo has thought of coordinating with his existing distributor and becoming a representative for the other company. Guillermo could still keep his high end custom work while he changes his company from primarily manufacturing to primarily distribution (University of Phoenix, 2013).
Sensitivity analysis is used to attempt to determine what changes will happen with the different choices. By doing this it can show how it could have an impact to what it has been predicted ("Sensitivity Analysis", 2013).
By looking at the information that is provided by the excel sheet it shows the different choices that Guillermo has and how it effect the cost and earning of each choice. By looking at how Guillermo’s company was doing prior to the changes and how each change can affect his business and what choice he could possibly make by looking at the different number.
Each choice has its positive and negatives affect to changing and starting a new system. By looking at the information that is provided by the excel sheet it gives information on how each option spending and earnings.
In the current method Guillermo is using production in mid-grade is 2,532 and for the high end is 506. If Guillermo would change to high tech he would see an increase for both mid-grade and high grade by 50 percent. If he went for the broker choice he would also see a 50 percent increase (University of Phoenix, 2013).
For direct material it stays the same 140 for mid-grade except for the broker where there is not cost. For high end we see the amount staying the same at 250 (University of Phoenix, 2013).
The direct labor is currently is 15hr per unit. Having the tow new options will increase to 40hr per unit because of the technical level. The labor time for mid-grade level is 20hr currently. Changing to high-tech would decrease it to 4hr. Also there is no labor for broker. For the high-end is currently 30hr per unit. By choosing high-tech or broker it takes 4hr (University of Phoenix, 2013).
The direct cost is for mid-grade currently is 440. By switching it is lower to 300 for high-tech and 360 for broker. Broker is bit more because of the broker cost needs to be included. The high-end finish it is currently 700. High-tech solution and broker lowers it to 410 (University of Phoenix, 2013).
Price per unit for mid-grade is currently 509. Both options it lowers the price to 459 because of the increase of supply. For high-end it is currently 879. There is decrease of 10 percent for high-tech and broker. The decrease happens because of increase in supply (University of Phoenix, 2013).
Another part also includes the plant overhead cost per year....