Chapter 6 Case Study Essay Example

the Kmart order based on an estimated $6. Technology Plus could purchase clocks to fill the Kmart order for $11 from Silver Star, a Korean manufacturer with a very good quality record. Silver Star has offered to reduce the price to $7. 50 after Technology Plus has been a customer for 6 months, placing an order of at least 1,000 units per month. If Technology Plus becomes a “preferred customer” by purchasing 15,000 units per year, the price would be reduced still further to $4. 50. Alpha Products, a local manufacturer, has also offered to make clocks for Technology Plus.

They have offered to sell 5,000 clocks for $4 each. However, Alpha Products has been in business for only 6 months. They have experienced significant turnover in their labor force, and the local press has reported that the owners may face tax evasion charges soon. The owner of Alpha Products is an electronic engineer, however, and the quality of the clocks is likely to be good. If Technology Plus decides to purchase the clocks from either Silver Star or Alpha, all the costs to manufacture could be avoided, except a total of $5,000 in overhead costs for machine depreciation.

The machinery is fairly new and has no alternate use. Although Technology Plus would profit more from manufacturing the alarm clocks over buying them from Silver Star, buying the alarm clocks from Alpha Product will give Technology Plus the most profit. If the alarm clock is to be sold to Kmart for $14. 50, buying the product from Alpha Product will Technology Plus $8,250 more than if the company manufactured it themselves.

What should it do in regard to

continuing to manufacture the multi-alarm alarm clocks? If Technology Plus is considering continuing to keep the alarm clock as one of its products, the company will benefit from buying the alarm clocks from Silver Star. The discounts that Silver Star is offering will lower the price per product as well as the manufacturing cost. Be prepared to defend your answer.