[SCHEMES PT4(ANALYSIS)] [200points total]
4. Analysis and Making Production Decisions
You have now provided your company’s management with powerful tools that model the cost of
production in the three factories. When you get an order for a certain number of units, you can be
informed of the cost that would be incurred by each factory if chosen to fulfill the order. In reality, the
decision must also consider many other factors, but in our scenario, we want to fill our orders at the
lowest average cost per unit. Consider each of the following questions as a separate, unrelated day of
business.
a) On Monday, you have a single request: Order A for 15,000 units. It must be fulfilled by
a single factory. To which factory do you send the order? Explain your decision.
Support your argument with numbers.
b) On Tuesday, you have two orders. You may send each order to a separate factory OR
both to the same factory. If they are both sent to be fulfilled by a single factory, you must
use the total of the two orders to find that factory’s cost per unit for production on this
day. Remember that the goal is to end the day with the lowest cost per unit to produce
the company’s products. Order B is 7,000 units, and Order C is 30,000 units.
• First, consider giving the orders to separate factories. Use these values and the
following formula to calculate the average weighted cost per unit.
( )(# ) + ( )(# )
#
• Second, consider sending both orders to a single factory that has the lowest cost
per unit to produce 37,000 units.
Student Guide (continued)

c) Compare the two options. Decide how you will send the orders out, and document your
decision by completing the daily production report below.

Production Report for Tuesday

Order # of Units Factory
B 7,000 ______
C 30,000 ______
Total # of units produced for the company today: ______
Average cost per unit for all production today: _____