In the context of the Wriston Manufacturing case, explain why shutting Detroit will increase Wriston’s overall cost even though the network has excess capacity and Detroit is the most expensive plant to manufacture in.

Shutting Detroit will increase Wriston’s overall cost because

Question 2
Two companies A and B have invested in expensive flexible manufacturing systems that allow the changeover time between products to be reduced to seconds. The annual reports of the two companies contain the following information:

Firm A Firm B
Number of products sold 2 2,000
Average sales volume per product 170,000 170
Number of new products introduced in past year 1 200

Circle the statement you most agree with:

• As sales volume increases it is better for a firm to invest in processes that have a lower variable cost per unit even if the fixed cost is higher

• As sales volume increases it is better for a firm to invest in processes that have a lower fixed cost even if the variable cost per unit is higher

• The volume sold has no impact on the type of process that is most appropriate for a firm

Explain:

Question 3
A consulting firm has four ranks – associates, managers, partners and directors. Each year, the firm hires 400 associates. On average, there are 2,000 associates in the firm. When evaluated for promotion, 25% of the associates are promoted to managers. The remaining 75% depart the firm. The firm also hires 100 managers each year from outside. The average tenure for managers is 4 years (whether they were promoted internally or hired from outside) before they come up for promotion. 15% are promoted to partners with the remaining 85% departing the firm. Each year, the firm hires 10 new partners from outside the firm. Partners spend an average of 12 years at the firm before they are considered for promotion to director. 25% are promoted to director with the remaining 75% departing the firm. The firm has an average of 100 directors. Directors retire at a certain age. The flow of personnel is as shown below: