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Unformatted text preview: Key points for the Operations Advantage Operations vs. sales (marketing) o Generate demand vs. provide the supply integration key Elements involved in different types of operation o Get it done Can someone else do it better? People and processes produce products o Connection to HR and organizations structure Decisions to Consider o Capacity, make or buy, subcontracting, scheduling, contingencies, inventory, supplier relationships Control Metrics what to focus on for success Goals what customer wants quality, service, price (cost) Key points from last class Concept of contribution not just breakeven o Contribution margin with units (P-VC) o Contribution rate with totals (1-VC/Sales) Used when dealing with totals Applications o When to calculate breakeven and what to do with it Margin of safety, and interpreting that margin o Make a decision between two alternatives Decision point o Making a decision that would affect costs and/or volumes Process Quantitative INCREMENTAL contribution vs. incremental fixed Qualitative issues What would you want to calculate to help make your decision? o Incremental changes o Breakeven o Margin of safety Clicker Questions 1. If you are considering introducing a new product to your product line, what would you want to calculate to help make your decision? Answer: All of the following o the incremental contribution relative to the incremental fixed costs o The breakeven relative to the market and your projected share o The margin of safety given your projected sales 2. If you are able to produce in another country with a lower age rate that would decrease your variable cost from $10 to $5 per unit, should you drop your price...
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- Fall '10