Business Decision Mapping Essay

The black medick Manufacturing Chicago plant manager, Sean Fitzpatrick is contemplating replacing a large musical composition of manufacturing equipment. Mr. Fitzpatrick is also inline for a promotion to Shamrocks larger Houston plant within the abutting year, and is hesitant to make any ends that depart reduce short-run operate(a) income and his performance evaluation. While the prospective replacement equipment promises to reduce hard currency operating(a) cost, it costs $90,000, as well as the loss on disposal cost of the old equipment, which has non fully depreciated. Prior to making a end, Mr. Fitzgerald must identify all relevant costs and chose a decision for the best interest of Shamrock (Datar, Rajan, 2013).AnalysisThe available data to give in this case is the old gondolas purchase price ($150,000) the current withstand value of the old form ($60,000) the market value of the old machine ($36,000) the cost of the red-hot equipment ($90,000) and the reduction i n annual cash operating costs ($32,500). alone historical costs are considered irrelevant, as they sop up already occurred and have no effect on future costs. The all relevant costs that should be considered for this decision are the future cash operating costs, the disposal value of the old machine, and the cost of the new machine that give be deprecated over the next two years.Based on the 1 and 2 worksheets in Appendix A of this document, year angiotensin-converting enzyme yields an increase in expenditures of $6500, but includes the $24,000 loss of disposal of the old machine, which is irrelevant. The still relevant data is the total biennial costs shown on worksheet 2 that shows a reduction in total relevant cash merge of $11,000. The results of worksheet 1 are not beneficial for Mr. Fitzgerald, but the overall results in year two benefit Shamrock. Based on the 3 worksheet, with a lower new equipment cost ($77,000), year one breaks even, which is irrelevant, and the to tal two-year reductions in total relevant cash function are $24,000. terminationBased solely on the worksheet information (Appendix A), the company should replace the equipment. All relevant costs located in worksheets 2, and 3 indicate that Shamrock manufacturing pull up stakes benefit by replacing the machines at either equipment cost. However, worksheet 1 presents a worry for Mr. Fitzgerald as it shows a $6500 increase in the for the first time year expenses, which are irrelevant in the long-term, but may get ahead Mr. Fitzgerald not to purchase the new equipment because it may reflect badly on the short-run net operating income of his plant during the evaluation period for his promotion. Worksheet 3 offers a breakeven scenario in the first year and a $24,000 reduction in relevant cash flows in year two, which is the best option for Mr. Fitzgerald and Shamrock, if available. point of referenceDatar, S., Rajan, M., (2013). Financial and Managerial accounting, custom edition , Pearson Learning Solutions, Ch. 9Appendix AShamrock Manufacturing relevant cash flow analysisAppendix B5-Step Critical Thinking Decision-Making Process MatrixStep 1 localize the occupation(s) and uncertainties.What exactly is the problemSean Fitzpatrick has an opportunity to decrease long-run cash flow by replacing a large piece of plant equipment.The problem is this Mr. Fitzpatrick is up for a promotion and is concerned that any short-run decreases in operating income go away affect his performance evaluation.This is an important problem becauseMr. Fitzpatricks decision may be good for the company, but could hurt his rush aspirations.The key question(s) that needs to be answered to solve this problem is What is the best decision for shamrock in the long-run?Step 2 Obtain information.The undermentioned 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 decisi on 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 opinion areI 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 kick the bucket toSean Fitzpatrick.Note Remember to view the information you have obtained for potential bias. This is from the spatial relation 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 others data because of your own bias(is). Step 3 be predictions about the future.If this problem gets solved, whatever important implications are Long-run relevant cash flows will be reduced, and operating income will increase.If this problem does not get solved, some(a) important implicat ions are An opportunity to decrease relevant cash flows will be missed.The potential alternative solutions to solve the problem are save up the status quo or make a tough decision that will benefit Shamrock in the long-run.Note if the problem is one-dimensional, there may be just one correct solution. Step 4 Make decisions by choosing among alternatives.What is the best solution and whyBy the new equipment, because it decreases long-run relevant cash flows.Step 5 Implement the decision, evaluate performance, and learn. In business, the fifth step in the decision making process is death penalty. In the MBA program, most times you will end with Step 4 since you will not have the opportunity to implement. You may be asked to develop an implementation plan and recommend how you will evaluate performance in some assignments.