Memo Essay Example | Topics and Well Written Essays - 750 words - 1

Memo - Essay Example However, you also asked me to consider the opinions of the employees at the plant and what they feel about working overtime. We have completed the report that you asked for and this report presents the cost differentials of the two alternatives to increase the production and manufacturing. Moreover the report analyzes both alternatives in detail and also provides recommendations after considering the cost differential as well as the responses of the employees. Summary I have analyzed that the cost per unit of overtime and if the production of additional 150 units per day is increased through overtime then it would cost $388.54 or $2.59/unit. On the other hand, the cost of production for the second shift with additional 150 units per day would be $421.08 or $2.81/unit. Therefore, it shows that the cost of production with overtime is lower if the production is 150 units and Wilderness Toys would be able to save $0.22 per unit or $32.32 for 150 additional units. However it has been foun d that most of employees are not willing to work in the long term but only for the short term. Therefore because of this reason, I would prefer Wilderness Toys to start a second shift rather than asking employees for overtime. Discussion As the demand of new lighted hiking hat has been increasing, therefore there is a need to increase the demand of the product. In order to increase the production and meet the increasing demand, the management of the company has two different alternatives; to start a new production shift or to require its employees to work overtime. The report presents the cost differentials with the two alternatives in producing the new lighted hiking hat. Table 1 shows per unit cost of production of the two alternatives available. Table 1 also shows the differences between the two alternatives and it can be seen that per unit cost difference initially is in negative as per unit overtime cost is less than per unit second shift production cost. Therefore it reveals t hat if the management plans to produce fewer units then it is preferable that they can encourage employees for overtime rather than starting a second shift. Table 1: Per Unit Cost Units  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   OT unit cost  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   2nd shift unit cost   Differences 75 2.59 3.49 -0.9 150 2.59 2.81 -0.22 225 2.59 2.58 0.01 300 2.59 2.46 0.13 375 2.59 2.46 0.13 450 2.59 2.46 0.13 525 2.59 2.46 0.13 600 2.59 2.46 0.13 Figure 1 graphically shows the cost per unit of the alternatives and it can be seen that the cost per unit of second shift at 75 units is very high in comparison to per unit cost of overtime. However per unit cost of second shift has been decreasing as the production is increasing and it is visible. As the production increase, per unit cost of second shift would decrease whereas the cost per unit of overtime would remain the same irrespective of the production. Figure 1: Cost Per Unit Figure 2 shows the cost differential between the two alternatives and it can be identified from the Figure 2 that the difference is in negative initially thus, showing that per unit cost of overtime is less than the per unit cost of second shift. However, as the production