Essay on Brief 5, MBA 733

916 Words Oct 23rd, 2013 4 Pages
To:
From:
Subject: Shamrock manufacturing
Date:

The Shamrock Manufacturing Chicago plant manager, Sean Fitzpatrick is contemplating replacing a large piece of manufacturing equipment. Mr. Fitzpatrick is also inline for a promotion to Shamrocks larger Houston plant within the next year, and is hesitant to make any decisions that will reduce short-run operating income and his performance evaluation. While the prospective replacement equipment promises to reduce cash operating costs, it costs $90,000, as well as the loss on disposal cost of the old equipment, which has not fully depreciated. Prior to making a decision, Mr. Fitzgerald must identify all relevant costs and chose a decision for the best interest of Shamrock (Datar,
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Step 2: Obtain information.
The following information is needed to answer this question…
What are the relevant costs that impact the decision to keep or replace the equipment? Based on the #1 and #2 worksheets, what decision would be made in years one and two? Based on the #3 worksheet, would the decision be different for years one and two compared to the initial cost of the new equipment?

Some important assumptions I am using in my thinking are…
I believe that the best decision for Shamrock is not the best decision for Mr. Fitzpatrick, which creates an ethical dilemma.

The points of view relevant to this problem belong to…
Sean Fitzpatrick.

Note: Remember to view the information you have obtained for potential bias. This is from the perspective of your own bias to the research and the bias of the authors who compiled the data and the research you gathered. In other words, do not discount the importance of other’s data because of your own bias(is).
Step 3: Make predictions about the future.
If this problem gets solved, some important implications are…
Long-run relevant cash flows will be reduced, and operating income will increase.

If this problem does not get solved, some important implications are…
An opportunity to decrease relevant cash flows will be missed.

The potential alternative solutions to solve the problem are…

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