San Juan Cell Phones Case Study Identify

San Juan Cell Phones Case Study

Identify and describe each of the costs of production at San Juan Cell Phones, and explain how they differ from one another.

This scenario presents a clearly defined set of microeconomic challenges for both Maria and Lisa. Assuming that Lisa decides to accept the order, she will be presented with an opportunity to operate the factory at full capacity during the course of the next three months, thus honoring one of San Juan Cell Phone's Statement of Values by having employees working on a constant basis, and additionally, she will earn a the coveted bonus check for her work. In the event that the factory had excess capacity of 100,000 units, and Big Box asking price remained $20 per unit, this would present Lisa with the optimal decision. However, should Lisa elect to utilize the Beta Model Line to produce the excess 30,000 units needed, this production line change would cause the factory to develop a 30,000 unit deficit of Beta Models. Based on the data provided by Table 1: (Unit Profitability Report), when units are sold according to this scenario, San Juan Cell Phones will then produce a profit of $90,000 by manufacturing and distributing the Alpha model, as opposed to the $240,000 profit generated by manufacture and sale of the Beta model. San Juan Cell Phones can risk $150,000 of potential profit by making the change to an alternative production line, and when the company chooses to maintain the original asking price San Juan Cell Phones will incur losses. When the phones are sold at a price point of $15 each, and variable cost per unit stays constant based on Table 1 (Unit Profitability Report), the company will suffer losses of $2 per unit, totaling $200,000 for a $140,000 overall deficit. In this scenario, the variable cost per unit must be decreased by $2 or more to reach the point of profitability. An alternative exists, however, with the introduction of the OEM for manufacturing purposes, and this alternative would ultimately be produce the greatest profits, with an estimated $100,000 increase in profit margins.

2.) Identify alternative solutions to meet the end-state goals.