Issues of Quality and Time on C-V-P Analysis Decisions
Response to the following problem:
Describe how to analyze whether the difference between sales price and variable costs, as well as the volume of sales, is sufficient to pay for all fixed costs in an organization and provide a sufficient profit. A number of methods have been presented for analyzing these costs, volume, and price relationships. These methods all focus on quantitative issues that affect how a company manages its resources to maximize overall profits. However, there are a number of qualitative issues involving quality and time that should also affect decisions about what sales prices to set, how to manage fixed and variable costs, and which products should be emphasized within the organization. One way to trade off fixed costs for variable costs is to consider making large fixed cost investments in technology that result in automated production, merchandising, and service processes. These kinds of investments allow some variable costs, such as direct labor, to be reduced. Managing this cost trade-off often has strong implications on the quality of the product or service, as well as the timeliness with which it can be delivered. Both of these qualitative issues eventually affect the quantitative issues of costs, volume, and price. Go to your library and find an article describing one organization's effort to invest in automation or other technologies in order to reduce costs. Determine what quality and time issues are affected by the investment.
Write a 1 to 2 page memo describing what you found.