Terrapin Resources

# Decision Level 4

## Situation

• Evaluate your decisions. Study your Company Report. Were you able to balance your sales and orders? Is your inventory growing? Maybe you need to lower prices or increase your promotions budget. Do you have more orders than you can fill? Maybe you can raise prices.

• Study the competition. Study the Industry Report. What strategies are other companies following? Are they earning higher profits than your company? What does your company need to do to be more competitive? Explain.

INVESTING IN NEW MACHINERY

So far you have been relying on a printing company to imprint the caps you are selling. Sometimes it can be more profitable to do the job yourself if you have the right tools and equipment.

DECIDING WHETHER OR NOT TO LEASE A MACHINE

You can continue having an outside company print your caps, which currently costs you \$1.00 per cap. Or you can lease a machine to print caps yourself. (You can make this decision just once during the contest.) The calculation information in the next part will help you decide whether or not your company should lease the imprinting machine.

## Calculation

Three machines are available for you to consider leasing:

Model Weekly Lease Cost Per Cap Imprinting Cost
ECONOMY \$25 \$0.75
STANDARD \$50 \$0.50
DELUXE \$75 \$0.25

Which would be best for your company? Let’s do a few calculations.

1. Multiply the imprinting cost (IC) of each cap by the number of caps sold.

2. Add the answer to the weekly cost of leasing the machine (L).

3. The result (T) is the weekly cost of the new imprinting machine.

4. Compare this to the cost of printing your caps outside at \$1.00 per cap.

Complete the chart below. Which machine will imprint caps at the lowest cost for you? (To get you started, we’ve done the calculations for a sales volume of 75 caps per week for each machine.)

As you can see from the chart, if your company is pursuing a “high price—low volume” strategy, you might not want a machine that is only economical if you print more caps than you can sell. However, if your company has a “low price—high volume” strategy, you could reduce your costs with a machine that imprints caps quickly and inexpensively. Make some calculations. Can an investment in an imprinter pay off for your company?

## Decisions

What price will your company charge for caps?
How many boxes of caps will you order?
What will you spend for promotion?
Which machine will you lease? ❑ none ❑ Economy ❑ Standard ❑ Deluxe

Enter your decision into the computer.