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Unformatted text preview: t we could produce up to 800 thousand units on first shift. We could produce another 800 on second shift, but our labor costs would increase 50%. Capacity and automation are ordered on January 1st and arrive on December 31st, effectively one year later. Suppose that we have capacity for 800. We expect demand to be 1200 next year. We could produce 800 on first shift and 400 on second. Or we could increase capacity to 1200 and produce everything on first shift. Or we could increase automation ‐ we would still produce 400 on a second shift, but at some point our labor costs fall enough that we are indifferent. How do we make the decisions? Bring up the Production spreadsheet. Under “Physical Plant” we see “Buy/Sell Capacity.” To buy an additional 100 thousand units of first shift capacity, enter “100.” To sell 100 thousand units, enter “‐100.” Automation is rated on a scale of 1 to 10. To increase automation enter a new value. The cost of the investment appears as a pos...
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This note was uploaded on 01/19/2014 for the course BA 101 taught by Professor Daseau during the Fall '06 term at University of Oregon.
- Fall '06
- Business, Foundation Report