Question
Please answer the following and show any work 1. Organize the available data on cost, revenue, and probability estimates in a table. Where to get
Please answer the following and show any work 1. Organize the available data on cost, revenue, and probability estimates in a table.
Where to get info from:
significant low-cost labor available to produce the products. As a result, GoTrax is considering setting up their own in-house production facility in Nepal. However, they are not ruling out the option to continue to outsource manufacturing (in Taiwan).
Given their current supplier in Taiwan, they would not need to pay any fixed cost but would have to guarantee to purchase 55K units for $1100 each.
If they decided to produce the e-bikes themselves in Nepal, they would have an estimated fixed cost of approximately $21 million dollars including mortgage, machinery, overhead and fixed labor costs. The unit cost to manufacture each e-bike would be $825.
The selling price of the GoTrax e-bikes would be $1895 each. One of their main concerns is regarding demand. If demand is strong, the number of e-bikes they can sell is uniformly distributed between 45K and 75K. If demand is weak, the number of e-bikes they can sell is uniformly distributed between 20K and 50K. There is a 60% chance that demand will be strong.
If GoTrax chooses to continue to outsource and the demand is greater than the 55K, they can only sell the 55K e-bikes that they purchased. If demand is less than the 55K e-bikes, they will only earn revenue on the amount demanded even though they must purchase the full 55K e-bikes from their vendor.
If GoTrax chooses to manufacture the e-bikes themselves, they can produce an initial 30K e-bikes and then will have the option to run a second production run of anywhere between 0 and 45K additional e-bikes in response to market conditions. The timing of the second production run would be shortly after GoTrax learns if the market will be weak or strong. Thus, the total quantity that GoTrax can produce will vary between 30K and 75K e-bikes - that's a 30K minimum from the first production run plus anywhere from 0 to 45K units for the second run.
Once again, given that demand varies, if GoTrax produces more e-bikes than the demand, it will only be able to collect revenue from the e-bikes sold and if the demand is greater than the number of e-bikes produced (after the second production run), GoTrax can only sell the number of e-bikes produced.
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