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# Companies considering new cost-cutting manufacturing

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Senior Manager
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Companies considering new cost-cutting manufacturing [#permalink]

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23 Aug 2006, 01:09
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Companies considering new cost-cutting manufacturing processes often compare the projected results of making the investment against the alternative of not making the investment with costs, selling prices, and share of market remaining constant.

Which of the following, assuming that each is a realistic possibility, constitutes the most serious disadvantage for companies of using the method above for evaluating the financial benefit of new manufacturing processes?

(A) The costs of materials required by the new process might not be known with certainty.
(B) In several years interest rates might go down, reducing the interest costs of borrowing money to pay for the investment.
(C) Some cost-cutting processes might require such expensive investments that there would be no net gain for many years, until the investment was paid for by savings in the manufacturing process.
(D) Competitors that do invest in a new process might reduce their selling prices and thus take market share away from companies that do not.
(E) The period of year chosen for averaging out the cost of the investment might be somewhat longer or shorter, thus affecting the result.

Can it be B or C ? If not, then plz explain...
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23 Aug 2006, 01:18
IMHO D
Competitors that do invest in a new process might reduce their selling prices and thus take market share away from companies that do not.
Hence all calculations would be inacurate
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23 Aug 2006, 01:27
Its between A and D.
D seems to be more 'dangerous' than A.
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Re: CR - Cost Cutting [#permalink]

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23 Aug 2006, 06:44
I agree, it's A/D and I think it's D. The costs might change but thast will change the costs of the project considered while in this evaluation technique (and we asked to weaken the technique), the project is gauged against the alternative scenario that has a market share specified in it, and if the market share changes, the gauge will be off.
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23 Aug 2006, 07:18
I think it is D...A goes out of scope

C doesn't do more than confusing reader

B and E are again out of scope.
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Re: CR - Cost Cutting [#permalink]

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23 Aug 2006, 12:17
sumitsarkar82 wrote:
Companies considering new cost-cutting manufacturing processes often compare the projected results of making the investment against the alternative of not making the investment with costs, selling prices, and share of market remaining constant.

Which of the following, assuming that each is a realistic possibility, constitutes the most serious disadvantage for companies of using the method above for evaluating the financial benefit of new manufacturing processes?

(A) The costs of materials required by the new process might not be known with certainty.
(B) In several years interest rates might go down, reducing the interest costs of borrowing money to pay for the investment.
(C) Some cost-cutting processes might require such expensive investments that there would be no net gain for many years, until the investment was paid for by savings in the manufacturing process.
(D) Competitors that do invest in a new process might reduce their selling prices and thus take market share away from companies that do not.
(E) The period of year chosen for averaging out the cost of the investment might be somewhat longer or shorter, thus affecting the result.

Can it be B or C ? If not, then plz explain...

should be D.

A is severe to all but D is specific to those that donot mfg. processes. companies that do not adopt the new mfg. syslem will loose the market.
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23 Aug 2006, 17:02
D. What's d OA?
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23 Aug 2006, 23:31
D

B and C are the advantages of this approach.
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24 Aug 2006, 00:17
In fact i waz thinking more like (A) or (E) .But (E) would affect both,(A) would be my choice.And these are projected ,not really implenented comparisons.
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24 Aug 2006, 00:42
OA is D...
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