The plant upgrade option that reduces production run setup costs by 50% each yea

Question

The plant upgrade option that reduces production run setup costs by 50% each year and costs $8 million per million pairs of plant capacity (which causes depreciation costs at the plant to rise by 5% of the capital cost of the upgrade) merits careful consideration by company managers when they are committed to a long-term strategy to reduce manufacturing costs per pair produced at each of the company's plants to as low a level as possible-lowering the costs for production run setup each year helps achieve this strategic objective. they are committed to keeping the company's 2-million pair plant in North America open for the long-term and the company's strategy calls for this plant to produce 500 models/styles (which entails annual production run setup costs of $12.5 million) every year through Year 20. they are committed to a long-term strategy of producing branded footwear with an S/Q rating of 7-stars or higher at all of the company's plants. the company plans to close the No

Explanation / Answer

The plant upgrade option that reduces production run setup costs by 50% each year and costs $ 8 million per million pairs of plant capacity (Which causes depreciation costs at the plant to rise by 5% of the capital cost of the upgrade) merits careful consideration by company managers when

Answer

They are committed to a long term strategy to reduce manufacturing costs per pair produced at each of the company’s plants to as low a level as possible- lowering the costs for production run setup each year helps achieve this Strategic objective.

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