12.3 Broad Cost Leader - Practice Round 2

Practice Round 2

R & D Round 2

Cake - Improve positioning and reduce age. Reduce reliability (MTBF) to reduce material cost. Example: Increase Cake's performance by 0.9, reduce size by 0.9, and reduce MTBF by 1000 hours.

Cedar - Leave positioning alone, allowing the product to age further. Reduce reliability (MTBF) to reduce material cost. Example: Reduce Cedar's MTBF by 1000 hours.

Cid - Improve positioning and reduce age. Reduce reliability (MTBF) to reduce material cost. Example: Increase Cid's performance by 1.1, reduce size by 1.1 and reduce MTBF by 1000 hours.

Coat - Improve positioning and reduce age. Reduce reliability (MTBF) to reduce material costs. Example: Increase Coat's performance by 1.4, reduce size by 0.4 and reduce MTBF by 1000 hours.

Cure - Improve positioning and reduce age. Reduce reliability (MTBF) to reduce material costs. Example: Increase Cure's performance by 0.4, reduce size by 1.4 and reduce MTBF by 1000 hours.

Marketing Round 2

Cake - Offer a price cut, hold promotion and sales budgets near current levels. Forecast improved unit sales. Example: Price $25.00, promotion budget $1000, sales budget $1000, and sales forecast 1400.

Cedar - Offer a price cut, hold promotion and sales budgets near current levels. Forecast improved unit sales. Example: Price $18.50, promotion budget $1000, sales budget $1000, and sales forecast 2100.

Cid - Make moderate cuts in price, hold promotion and sales budgets steady. Forecast improved unit sales. Example: Price $36.00, promotion budget $1000, sales budget $1000, sales forecast 480.

Coat - Make moderate cuts in price, hold promo and sales budgets. Forecast improved unit sales. Example: Price $32.00, promotion budget $800, sales budget $800, sales forecast 520.

Cure - Make moderate cuts in price, hold promo and sales budgets. Forecast improved unit sales. Example: Price $32.00, promotion budget $800, sales budget $800, sales forecast 450.

Production Round 2

For each product, schedule production using the formula:

(Unit Sales Forecast X 1.15) - Inventory On Hand

Cake - Increase automation level by 1.0 or 2.0 points, not to exceed 8.0.

Cedar - Increase automation level by 1.0 or 2.0 points.

Cid - Increase automation level by 0.5 to 1.5 points, not to exceed an automation level of 6.0.

Coat - Increase automation level by 0.5 to 1.5 points, not to exceed an automation level of 6.5.

Cure - Increase automation level by 0.5 to 1.5 points, not to exceed an automation level of 6.5.

Finance Round 2

Match your plant investment with a long-term bond. If you do not have sufficient new bond debt capacity, issue stock to cover the shortfall.

Look at the proforma balance sheet, and add together your cash and inventory accounts. Apply the following rule of thumb. Keep between 15% and 20% of your balance sheet assets in cash plus inventory. You do not care about the mix, but you do want to have adequate reserves to cover unexpected swings in inventory.

Adjust your cash position to meet the guideline from Round 1. If you are cash poor, issue stock. If you are cash rich, pay dividends and buy back stock.

Do not issue current debt.

Save decisions (select "directly to the website").