Select Page

Carded Graphics, LLC Case Study Help

Sensitivity Analysis

Because the carding model is designed to increase capacity, reduce variable costs, and reduce wasteful costs associated with older printers, it is about replacing printers.

Therefore, upgrading the card solves any future savings on graphics carding, including variable cost savings (excluding labor), savings due to savings, and other savings not mentioned in this case. electricity and labor costs as newer machines may require less maintenance and less labor.

Upgrading to a new letter opener can not only reduce the cost of Carded Graphics, but can also mean additional costs for your business, including additional overhead, as the new machine takes up more space than the old cutting machine. -paper. Other costs not mentioned may include manual training costs that allow them to operate the machine and other setup costs that are related to changes in the new equipment system. On the other hand, the new letter opener has a market price of $ 700,000 and Carded Graphics expects its residual value to be $ 120,000 in eight years.

The results of the sensitivity analysis are shown in Exhibit 3 of the document which represents the fluctuations in growth rate of sales and growth rate of cost of goods sold and other expenses. The other side of the chart shows the net present value of the marginal cash flows at every phase of the fluctuation separately in growth rate of sales and growth rate of costs of goods sold and simultaneously in both growth rates. The corresponding net present value shows that even the situation will be worsening even 25 percent, the net present value of marginal cash flows will not be in negative, so, it is the right decision to replace the sheeter with old one as it is beneficial for the company in future.

Recommendations

It is recommended to use card graphics to buy a new letter opener. A professional guy said the company would benefit from further production and an increased capacity. Second, the waste and variable cost of the new machine will be lower than that of the old machine, saving the company’s money. Finally, the valuation of the investment also shows a positive net present value, which is beneficial for the investment on the chart.

Share This