I need help filling out the blank tables EMachine4All.com assembles and sells in

Question

I need help filling out the blank tables

EMachine4All.com assembles and sells inexpensive laptop computers from industry standard parts which are generally purchased from the lowest bidder. Its strategy is to avoid direct competition with major producers such as Dell and Hewlett-Packard by targeting its product at budget-conscious individual consumers and small businesses. EMachine4All.com also promotes and sells its products only through the Web in order to keep marketing costs low and to avoid head-to-head competition with major retail outlets such as Fry’s and Best Buy. As a result, most of its sales are made one unit at a time. A laptop is not assembled until after the order is received in order to minimize inventory and obsolescence cost. Each completed laptop is then shipped by UPS from the assembly plant directly to the customer. Lap-Tops-R-Us currently operates four assembly plants, all of which are located in the Southern U.S. and Mexico because of relatively low labor costs. EMachine4All.com has built its reputation on shipping all orders in a week or less. So, if the company does not have enough overall internal capacity to fulfill an order in any given week, it will subcontract out the assembly task to a small electronics company near Asheville. On short notice the subcontractor picks up parts at the Ashville plant and then transports the assembled computers back to the Ashville plant for shipment to the customer. The short notice requirement expected of the subcontractor makes this option very expensive at $185 per computer. This cost can be treated as the subcontractor’s labor charge for analysis purposes; however, it also covers his overhead, cost of picking up parts and delivering assembled computers to the Ashville plant. It also covers his profit margin. But it does not include the cost of the parts or the shipping cost to the customer, both of which are paid for by EMachine4All.com. The company uses the subcontractor even though it loses money on every laptop they assemble because it knows its reputation will be damaged if it cannot fulfill all customer orders on a timely basis. The four plants and the subcontractor with their average operating costs and capacities are as follows. The subcontractor capacity is whatever is necessary to meet demand.

Here are graphs with specific information...

For marketing and accounting purposes, the company has divided the U.S. market into six geographic regions. These regions along with their average selling prices and forecasted weekly demand levels are as follows:

Average UPS shipping costs, in dollars per unit, from any of the assembly plants (and the subcontractor) to any market area are as shown below. The shipping costs are included “free” to the customer.

QUESTION

1a: Fill in the table below to compute contribution per laptop from each plant and the subcontractor to each market area.

1b: Create a summary table of contributions per laptop, supply and demand like the one shown below.

Set up an appropriate transportation matrix table in Excel. Use the summary contributions table, as above. Solve. Paste the solution table from Excel to create a table of the number of laptops shipped from each plant to each market area as shown below:

1c: Fill in this table with weekly contribution, fixed cost, and operating profit generated at each of the plants. Also fill in the percent of capacity utilized at each plant.

1d: Create a table in Excel, like the one below, filled in with the total weekly profit contribution (both in dollars and as a percent of total dollars) generated in each market area.

Suppose that Management is now proposing that capacity be expanded to 3,000 units per week at the Guadalajara plant in order to eliminate the use of the expensive subcontractor and to provide for future growth in demand. Guadalajara was selected because of its low labor and parts costs. The expansion is not expected to change any variable costs; however, weekly fixed costs at Guadalajara are expected to increase to $225,000.

1e: Fill in this table below. Copy the summary contributions into Excel. Solve. Paste the solution into Excel to create a table of the number of laptops shipped from each plant to each market area as shown below

1f: Fill in this table below with weekly contribution, fixed cost, and operating profit generated at each of the plants. Also fill in the percent of capacity utilized at each plant.

1g: Fill in the table below, after the Guadalajara expansion. Fill in the table with the total weekly profit contribution (both in dollars and as a percent of total dollars) generated in each market area.

1h: Based on the analysis, do you recommend expanding the Guadalajara plant? Why or why not?

Assembly labor cost S/unit 17 14 18 10 185 Parts cost, S/unit (including inbound transportation cost 375 360 350 320 375 Fixed cost S/week Capacity units/week Asheville, NC Meridian, MS Round Rock, TX Guadalajara, Mexico Subcontractor 125,000 60,000 240,000 120,000 1,500 1,000 2,500 2,000

Explanation / Answer

Answer-1b NE SE NC SC NW SW Supply Asheville 141 47 90 117 60 87 542 Meridian 158 64 107 136 80 106 651 Round Rock 162 64 113 144 85 115 683 Guadalajara 188 90 137 170 114 146 845 Subontractor -27 -121 -78 -51 -108 -81 -466 Demand 622 144 369 516 231 373 2255 Answer-1c Contribution Fixed cost operating profit capacity percent of capacity Asheville 813000 125000 688000 1500 458.6666667 Meridian 651000 60000 591000 1000 591 Round Rock 1707500 240000 1467500 2500 587 Guadalajara 1690000 120000 1570000 2000 785 Subontractor - Answer-1d Contribution dollars Contribution % NE 746400 0.266838267 SE 158400 0.056628057 NC 516600 0.184684685 SC 516000 0.184470184 NW 300300 0.107357357 SW 559500 0.20002145 Total 2797200

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