Excersise 6-1: Moon Micro
Current Capacity 10,000 Option 1: Add Capacity to Santa Clara Plant E(Incremental Profit Option 1)
Server Sales Price $15,000 Additional Capacity 10,000 $58,000,000
Raw Material/Server
$8,000
Annualized Fixed Cost
10,000,000$
Labor/Server 500$ E(Incremental Profit Option 2)
$66,080,000
Option 2: Outsource to Molectron
Cost/Server $2,000
ONLY CONSIDER INCREMENTAL SERVERS (over 10,000/year)
Past Year Year 1 Year 2 Probability Option 1 Option 2
40%
Demand, Duu 22,500 32% Revenue $225,000,000 $262,500,000
Molectron Cost/Server 2,000$ Cost 147,500,000 175,000,000
Profit $77,500,000 $87,500,000
40%
Demand, Duu 22,500 32% Revenue $225,000,000 $262,500,000
80%
Demand up, Du15,000 Molectron Cost/Server 2,400$ Cost 147,500,000 180,000,000
Profit $77,500,000 $82,500,000
10%
Demand, Dud 15,000 8% Revenue $150,000,000 $150,000,000
Molectron Cost/Server 2,000$ Cost 105,000,000 100,000,000
Profit $45,000,000 $50,000,000
10%
Demand, Dud 15,000 8% Revenue $150,000,000 $150,000,000
Molectron Cost/Server 2,400$ Cost 105,000,000 102,000,000
Profit $45,000,000 $48,000,000
Servers Sold 10,000
40%
Demand, Ddu 15,000 8% Revenue $75,000,000 $75,000,000
Molectron Cost/Server 2,000$ Cost 62,500,000 50,000,000
Profit $12,500,000 $25,000,000
40%
Demand, Ddu 15,000 8% Revenue $75,000,000 $75,000,000
20%
Demand same, Dd10,000 Molectron Cost/Server 2,400$ Cost 62,500,000 52,000,000
Profit $12,500,000 $23,000,000
10%
Demand, Ddd 10,000 2% Revenue $0 $0
Molectron Cost/Server 2,000$ Cost 20,000,000 –
Profit ($20,000,000) $0
10%
Demand, Ddd 10,000 2% Revenue $0 $0
Molectron Cost/Server 2,400$ Cost 20,000,000 –
Profit ($20,000,000) $0
Total 100%