Considering the current situation being faced by ADDITIONS, increasing production and ensuring the company remains within its standards of operation before its customers are the most important aspect. This implies that proper management decisions should be embraced (Mason, 123). The following are some of the recommendation based on each of the options outlined above that are potential measures intended to be executed by the company to reach its goal.
Option #1: Using Family and Friends
Option 1 concerns using family and friends to support the business. It is expected that they will not be subjected to a payment but be provided with offerings as a way of motivating them. This is an advantage as the firm will incur less with regard to operation as the whole process would involve spending only $2,100 and giving them free products. Further, it is easy to recruit and assign family and friends to the duty since their abilities and weaknesses are well known (Mason, 139). Some of them may be familiar with the company and how it works hence may not need much time for training.
However, using a friend or family member may take advantage of their position and misuse the firm’s resources because they may believe it is difficult to fire a person with close ties (Mason, 201). At the same time, the existing employees may be demoralized as it will be considered favoritism. In this case, the firm production performance is likely to be affected.
Option #2: Hiring Workers on Temporary Basis
Employees can be hired on the temporary basis, that is, to work for a short period of time as a way of saving on expenses that would have been incurred when they were hired on permanent basis. The advantage of this approach is that it would enable the business to quickly adjust on the fluctuating workloads. In fact, since the staffs would be recruited from the agency, they are assured of qualification. Furthermore, it would enhance flexibility in staffing.
However, despite the fact that most of these employees are skilled, they must be trained on the needs of the job. This implies that the firm will have to incur extra expenses on training every time a temporary worker is hired. Morale and safety issues are also likely to emerge that adversely affect the overall performance of the firm.
Option #3: Investing $10,000 Of the Company’s Reserves in Production and Fulfillment Equipment
Although it is time-consuming to install, this option is the most appropriate. An investment into the automated machine would be costly at first but in the long run, it will be the most beneficial compared to the previous two options (Pinson, 144). Therefore, it is the recommended option.
Break –even Analysis
Table 1: Break – even Analysis for three months (October, November, and December)
|Fixed Cost||Variable Cost per Unit||Sales Price Per Unit||Break-even Units||Break-even Sales|
|Option 1||$ 2,100.00||$6||$18||175||$3,150|
|Option 2||$ 24,000.00||$6||$18||2,000||$36,000|
|Option 3||$ 10,000.00||$6||$18||833||$15,000|
Break-even point is calculated using the formula below;
Break-even point = Fixed Costs / (Sales price per unit – Variable Cost per Unit). As presented in the table, break-even measures the margin of safety by assessing a number of sales to be made to cover both fixed and variable costs (Pinson, 113). The first option will be the easily achievable as the company will only need to make $3,150 sales as the minimum to cover its costs. From here, the production point is profitable. The second option requires sales of $36,000 to reach the break-even point while the third option requires sales of $15,000 per month. Across all option, the third option is the most suitable as it is less costly to maintain compared to the other two.
Mason, Roger. Working for yourself: running a business, starting a company or being self-employed. London: Thorogood, 2012. Print.
Pinson, Linda. Anatomy of a business plan: the step-by-step guide to building your business and securing your company’s future. Tustin, CA: Out of Your Mind and Into the Marketplace, 2008. Print.