Subject: Decision Analysis task 3

I have reviewed the figures and have made a recommendation based on my findings. It is my determination that given the data, we should purchase new equipment.
Let’s analyze the data. The data below reflects the outcome of reconditioning old equipment, purchasing new equipment, and outsourcing. Below is an insert from POM for Windows an operations management tool used to determine best decisions in business operations.

There are two types of costs to consider, fixed and variable. Based upon the information given the relationship between cost and revenues are linear. In order to use the cost volume and breakeven analysis tool, variable costs must be constant. Here we have constant costs but different scenarios which qualify it to be used by this tool. Using this tool, I created inputs for reconditioning new equipment, buying new equipment, and outsourcing. The figures for fixed and variable costs were used from company research. It was determined that at 1,000 units the variable costs could be determined and that it would be a good place to set our volume for analysis. The total fixed costs for reconditioning is $50,000 with one million dollars spent in variable costs for a total cost of $1.5 million. To purchase new equipment, the fixed costs are $200,000 and the variable costs are half of the cost of reconditioning the old equipment at $500,000 for a total cost of $700,000. Finally, to outsource, while there would be no initial or fixed costs, the variable cost would be $3 million, twice as much as it would costs to recondition the old equipment and 4 times as much as simply buying new equipment. According to the data presented to me, Shuzworld will save the most money by buying new equipment. While the fixed costs are more, the variable costs don’t compare to that of reconditioning or outsourcing. Below is a copy of the