Cheers is a small firm focused on the assembly and sale of custom shoes. The firm is facing stiff competition from low-priced alternatives, and is looking at various solutions to remain competitive and profitable. Current financials for the firm are shown in the table below. In the first option, marketing will increase sales (and both cost of inputs and production costs) by 50%. The next option is Vendor (Supplier) changes, which would result in a decrease of 12% in the cost of inputs. Finally, there is an OM option, which would reduce production costs by 25%. Which of the options would you recommend to the firm if it can only pursue one option? In addition, comment on the feasibility of each option.

Business Function

Current Value

Cost of Inputs

$50,000

Production Costs

$30,000

Revenue

$83,000

What would be the impact on profit of the OM option, which would reduce production costs by 25%?

increase of $2000

decrease of $1000

increase of $7500

increase of $6000

profit will stay the same