Monday, March 4, 2019

Business Decision Mapping Essay

The hop clover Manufacturing gelt plant manager, Sean Fitzpatrick is contemplating renewal a large piece of manufacturing equipment. Mr. Fitzpatrick is also inline for a promotion to Shamrocks larger Houston plant within the next year, and is hesitant to coiffure any finales that pass on reduce short-run operational income and his performance evaluation. plot the prospective replacement equipment promises to reduce currency operating cost, it cost $90,000, as well as the loss on temperament cost of the sure-enough(a) equipment, which has not fully depreciated. Prior to making a purpose, Mr. Fitzgerald must severalize all pertinent costs and chose a decision for the beat out rice beer of Shamrock (Datar, Rajan, 2013).AnalysisThe available info to consider in this movement is the superannuated machines secure price ($150,000) the current book value of the old machine ($60,000) the market value of the old machine ($36,000) the cost of the newly-fashioned equipment ($90,000) and the reducing in annual coin operating costs ($32,500). completely historical costs be considered irrelevant, as they conduct already occurred and live no effect on future costs. The only relevant costs that should be considered for this decision ar the future cash operating costs, the disposal value of the old machine, and the cost of the new machine that will be deprecated over the next cardinal old age.Based on the 1 and 2 worksheets in Appendix A of this document, year one yields an increase in expenditures of $6500, but includes the $24,000 loss of disposal of the old machine, which is irrelevant. The only relevant data is the entireness two-year costs sh witness on worksheet 2 that shows a reduction in total relevant cash flow of $11,000. The results of worksheet 1 are not beneficial for Mr. Fitzgerald, but the overall results in year two hit Shamrock. Based on the 3 worksheet, with a lower new equipment cost ($77,000), year one breaks even, which is i rrelevant, and the total two-year reductions in total relevant cash flow are $24,000.ConclusionBased merely on the worksheet information (Appendix A), the company should replace the equipment. All relevant costs located in worksheets 2, and 3 indicate that Shamrock manufacturing will benefit by replacing the machines at either equipment cost. However, worksheet 1 presents a riddle for Mr. Fitzgerald as it shows a $6500 increase in the first year expenses, which are irrelevant in the long-run, but may encourage Mr. Fitzgerald not to purchase the new equipment because it may reflect badly on the short-run net operating income of his plant during the evaluation period for his promotion. Worksheet 3 offers a breakeven scenario in the first year and a $24,000 reduction in relevant cash flows in year two, which is the best option for Mr. Fitzgerald and Shamrock, if available.ReferenceDatar, S., Rajan, M., (2013). Financial and managerial accounting, custom edition, Pearson Learning So lutions, Ch. 9Appendix AShamrock Manufacturing relevant cash flow analysisAppendix B5-Step Critical thought process Decision-Making Process MatrixStep 1 Identify the puzzle(s) and uncertainties.What exactly is the problemSean Fitzpatrick has an opportunity to decrease long-run cash flow by replacing a large piece of plant equipment.The problem is this Mr. Fitzpatrick is up for a promotion and is concerned that any short-run decreases in operating income will affect his performance evaluation.This is an most-valuable problem becauseMr. Fitzpatricks decision may be good for the company, but could hurt his career aspirations.The key question(s) that ask to be answered to solve this problem is What is the best decision for shamrock in the long-run?Step 2 Obtain information.The following information is necessary to answer this question What are the relevant costs that impact the decision to keep or replace the equipment? Based on the 1 and 2 worksheets, what decision would be made i n years one and two? Based on the 3 worksheet, would the decision be different for years one and two compared to the initial cost of the new equipment?Some substantial assumptions I am using in my thinking areI believe that the best decision for Shamrock is not the best decision for Mr. Fitzpatrick, which creates an ethical dilemma.The points of view relevant to this problem belong toSean Fitzpatrick.Note call in to view the information you have obtained for probable mold. This is from the perspective of your own bias to the research and the bias of the authors who compiled the data and the research you gathered. In other words, do not discount the importance of others data because of your own bias(is). Step 3 Make predictions about the future.If this problem gets solved, some important implications are Long-run relevant cash flows will be reduced, and operating income will increase.If this problem does not get solved, some important implications are An opportunity to decrease r elevant cash flows will be missed.The potential alternative solutions to solve the problem are Keep the status quo or make a tough decision that will benefit Shamrock in the long-run.Note if the problem is one-dimensional, there may be expert one correct solution. Step 4 Make decisions by choosing among alternatives.What is the best solution and whyBy the new equipment, because it decreases long-run relevant cash flows.Step 5 Implement the decision, evaluate performance, and learn. In business, the fifth meter in the decision making process is implementation. In the MBA program, most clock you will end with Step 4 since you will not have the opportunity to implement. You may be asked to develop an implementation plan and cheer how you will evaluate performance in some assignments.

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