Question
Mary Monds is a production manager at a metal fabrication plant. Last night she read an article about a new piece of equipment that would
Mary Monds is a production manager at a metal fabrication plant. Last night she read an article about a new piece of equipment that would dramatically reduce her division's costs. Mary was very excited about the prospect, and the first thing she did this morning was to bring the article to her supervisor, Stephanie Popeel, the plant manager. The following conversation occurred: Mary: Stephanie, I thought you would like to see this article on the new PDD1130; they've made some fantastic changes that could save us millions of dollars. Stephanie: I appreciate your interest Mary, but I actually have been aware of the new machine for two months. The problem is that we just bought a new machine last year. We spent $2 million on that machine, and it was supposed to last us 12 years. If we replace it now, because the old machine was custom built, we will not be able to recoup any of our original $2 million outlay. If I go to top management now and say that I want a new machine, they will fire me. I think we should use our existing machine for a couple of years, and then when it becomes obvious that we have to have a new machine, I will make the proposal. Instructions: Mary just completed a course in managerial accounting, and she believes that there is a flaw in Stephanies thinking. Write a memo from Mary to Stephanie explaining Stephanie's decision making error.
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