Make Sure You Answer The Questions In This Assignment

Make Sure You Answer The Questions In This Assignments And No

Within the Discussion Board area, write words that respond to the following questions with your thoughts, ideas, and comments. This will be the foundation for future discussions by your classmates. Be substantive and clear, and use examples to reinforce your ideas: Additional Information: Because the decision about relocating manufacturing operations to the United States is so important, the board of directors at AutoEdge continues to systematically discuss every aspect of the situation. The following week, CEO Lester Scholl meets you for coffee to discuss next week's board meeting. "I'm hearing good things about you," he says.

"Ingrid and George tell me you've been very responsive and helpful." "That's good to hear," you say. "I've enjoyed working with them." "We're both busy, so I'll get right to the point," he says. "One of the main objectives of any business is to be efficient. Without efficiency, the company is essentially losing money. Am I right?" "Absolutely," you say.

"What must AutoEdge do," he says, "to obtain economies of scale with production? How do we know that it has achieved economies of scale? Conversely, how do we know if it is achieving diseconomies of scale?" "That's a good question," you say. "I can understand why you ask." But before you can respond, Lester's cell phone rings. After a minute, he ends the call and stands.

"I have to get back to the office to handle an emergency," he says. "Would you send me an e-mail with an answer to my questions, please?" "No problem," you say. "I'll get it to you before I leave work this afternoon." "I appreciate it," he says. "Thanks."

Paper For Above instruction

The decision to relocate manufacturing operations to the United States involves complex considerations rooted in economic principles, particularly those related to economies and diseconomies of scale. Understanding these concepts is crucial for the strategic planning and operational efficiency of a company like AutoEdge. This paper explores what AutoEdge must do to obtain economies of scale, how to determine if it has achieved such economies, and how to recognize signs of diseconomies of scale, all within the context of the company’s potential relocation decision.

Understanding Economies of Scale

Economies of scale refer to the cost advantages that a business can achieve as it increases production. When a company produces more units of a good or service, the average cost per unit tends to decrease. This phenomenon is primarily due to fixed costs being spread over a larger volume, operational efficiencies, bulk purchasing of materials, and specialization of labor (Peters & Waterman, 1982). For AutoEdge, achieving economies of scale would mean expanding production capacity in the U.S. to lower per-unit costs, enhancing competitiveness and profitability.

Strategies for Achieving Economies of Scale

To attain economies of scale, AutoEdge must focus on several strategic actions. First, increasing production volume is essential. This involves expanding facilities or investing in new manufacturing plants that can handle higher output. Second, optimizing supply chain logistics reduces costs associated with raw materials and distribution. Automating production processes with advanced technology can further reduce marginal costs. Additionally, bulk procurement of raw materials allows for discounts and better negotiation power with suppliers (Choi & Wang, 2010). Moreover, standardizing products and processes can lead to more efficient mass production, reducing waste and rework.

Indicators of Economies of Scale

AutoEdge can identify whether it has achieved economies of scale by analyzing cost behavior relative to production levels. A decreasing average cost per unit as output rises indicates economies of scale (Hansen & Mowen, 2019). Specifically, a graph plotting total cost against output should show a steep slope initially that flattens with increased production, signifying lower average costs. Economies of scale are also evident when unit costs decline due to bulk purchasing or process efficiencies, leading to higher profit margins. Internally, the company may also see increased productivity, reduced per-unit labor costs, and improved profit margins, all signs of economies of scale (Drury, 2018).

Recognizing Diseconomies of Scale

Conversely, diseconomies of scale occur when increasing production leads to higher average costs. This might happen due to operational inefficiencies, management complexities, communication problems, or overextension of resources (Berk & DeMarzo, 2017). For AutoEdge, signs of diseconomies of scale would include rising per-unit costs despite increased output, delays in production, declining product quality, or increased overhead costs that cannot be offset by higher output. The company might also experience managerial challenges, employee dissatisfaction, or logistical issues, all contributing to rising costs that erode benefits of scale (Brealey, Myers, & Allen, 2020).

Practical Implications for AutoEdge

For AutoEdge, understanding and monitoring these economies and diseconomies are vital for making informed decisions. When planning the relocation, the company should conduct cost-volume-profit analyses and utilize activity-based costing to measure cost behavior at different production levels. Continuous evaluation of operational efficiency and strategic capacity planning will help identify the optimal scale of operations that maximizes profitability without incurring diseconomies of scale. Strategic investments in technology, workforce training, and supply chain management are essential to sustain economies of scale and prevent negative effects as production scales up.

Conclusion

AutoEdge’s decision to move manufacturing operations to the United States hinges significantly on its ability to achieve economies of scale. By increasing production volume, optimizing processes, and managing supply chains effectively, the company can lower per-unit costs and increase competitiveness. However, careful monitoring is necessary to avoid diseconomies of scale, which can negate the benefits of scaling operations. Ultimately, a nuanced understanding of these concepts, coupled with strategic management, will guide AutoEdge toward operational efficiency and long-term success in its expansion efforts.

References

• Berk, J., & DeMarzo, P. (2017). Corporate Finance (4th ed.). Pearson.
• Breaney, R., Myers, S., & Allen, F. (2020). Principles of Corporate Finance (13th ed.). McGraw-Hill Education.
• Choi, T. M., & Wang, Y. (2010). Quantitative models for global supply chain management. Technological Forecasting and Social Change, 77(4), 558-574.
• Drury, C. (2018). Management and Cost Accounting. Cengage Learning.
• Hansen, D., & Mowen, M. (2019). Cost Management: Accounting and Control. Cengage Learning.
• Peters, T., & Waterman, R. (1982). In Search of Excellence: Lessons from America's Best-Run Companies. Harper & Row.
• Yamamoto, R., & Baker, M. (2016). Economies of scale and scope in manufacturing industries. Operations Management, 34(2), 123-135.