The plant upgrade option that reduces production run setup costs by 50% each year and costs 8 million per million pairs of plant capacity (which causes depreciation costs at the plant to rise by 5% of the capital cost of the upgrade) merits immediate and careful consideration by company managers when the company has 2 plants that have just been expanded to a capacity of 9 million pairs each as of Year 14 and when management expects to produce 50 models/styles at these two 9-million pair plants through Year 20 (production run setup costs are $1 million per year for 50 models/styles)

Subject:Operations ManagementPrice:2.85 Bought3

Share With

The plant upgrade option that reduces production run setup costs by 50% each year and costs 8 million per million pairs of plant capacity (which causes depreciation costs at the plant to rise by 5% of the capital cost of the upgrade) merits immediate and careful consideration by company managers when the company has 2 plants that have just been expanded to a capacity of 9 million pairs each as of Year 14 and when management expects to produce 50 models/styles at these two 9-million pair plants through Year 20 (production run setup costs are $1 million per year for 50 models/styles). the company built a 1 million-pair plant in Europe-Africa in Year 12 and the company's strategy calls for this plant to produce 350 models/styles (which entails annual production run setup costs of $10.5 million) every year through Year 20. they have decided as of Year 12 to build and operate a single plant of 15 million pairs In the Asia-Pacific to supply footwear to all four geographic regions