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So, eventhough some significant costs such as lease expense, service techs, fertilizer costs and overhead costs have decreased, the decrease in revenues due to the decrease in applications leave only a 1% contribution margin vs a 13% contribution in the before scenario. 3- Personal recommendation. It appears to me that the organization has already indicated that it wishes to back Amy Carter and the biological engineering and environment vision. Calling Amy the division’s thought leader. This new era project is a “hat trick” for the division and is the vision for Greenlawn’s future.

If the organization loses revenue in the short term, when can they expect to breakeven with the current revenues of the ten million. The expectation is that revenues will decrease to six million, but will then be capable of growing the customer base, whereby replacing the revenue lost by changing to the advanced new generation of products that are easier to apply, have lower costs and more importantly environmentally friendly. This environmentally friendly approach to Greenlawn’s business will keep the company at the cutting edge of technology in its field.

Maintaining its status and reputation as the nation’s largest lawn-care and landscape-services company. I would recommend either keeping it the same as before with the revenues at ten million, or reducing the fertilizer costs and selling the new generation of products in order to gain more customers. If more customers are gained due to environmentally friendly process than the revenues and contribution margin will increase. Should the organization change, they can expect a short term reduction in revenue, with the likeliness of long term sustainability for generations to come.

Case Study

Case Study Andrew–Carter, Inc.
Andrew–Carter, Inc. (A–C), is a major Canadian producer and distributor of outdoor lighting fixtures. Its fixture is distributed throughout North America and has been in high demand for several years. The company operates three plants that manufacture the fixture and distribute it to five distribution centers (warehouses).
During the present recession, A–C has seen a major drop in demand for its fixture as the housing market has declined. Based on the forecast of interest rates, the head of operations feels that demand for housing and thus for its product will remain depressed for the foreseeable future. A–C is considering closing one of its plants, as it is now operating with a forecasted excess capacity of 34,000 units per week. The forecasted weekly demands for the coming year are
Warehouse 19,000 unitsWarehouse 213,000 unitsWarehouse 311,000 unitsWarehouse 415,000 unitsWarehouse 58,000 unitsThe plant capacities in units per week are
Plant 1, regular time27,000 unitsPlant 1, on overtime7,000 unitsPlant 2, regular time20,000 unitsPlant 2, on overtime5,000 unitsPlant 3, regular time25,000 unitsPlant 3, on overtime6,000 unitsIf A–C shuts down any plants, its weekly costs will change, as fixed costs are lower for a nonoperating plant. Table 9.5 shows production costs at each plant, both variable at regular time and overtime and fixed when operating and shut down. Table 9.6 shows the distribution cost from each plant to each warehouse (distribution center).
Table 9.5 Andrew–Carter, Inc., Variable Costs and Fixed Costs per Week(Source: Trevor S. Hale)
FIXED COST PER WEEKPLANTVARIABLE COSTOPERATINGNOT OPERATINGNo. 1, regular time$2.80/unit$14,000$6,000No. 1, overtime3.52No. 2, regular time2.7812,0005,000No. 2, overtime3.48No. 3, regular time2.7215,0007,500No. 3, overtime3.42Table 9.6 Andrew–Carter, Inc., Distribution Cost per Unit(Source: Trevor S. Hale)
TO DISTRIBUTION CENTERFROM PLANTW1W2W3W4W5No. 1$0.50$0.44$0.49$0.46$0.56No. 20.400.520.500.560.57No. 30.560.530.510.540.35Discussion Question1.Evaluate the various configurations of operating and closed plants that will meet weekly demand. Determine which configuration minimizes total costs.
2.Discuss the implications of closing a plant.