Your task is to help George Granger and Julie Leary decide which of three mill designs to choose to replace the Old Leary Mill. Leary Organics has three different options. George Granger, Chief Milling Engineer, has solicited designs for two different new plants. Julie Leary, the founder’s daughter and principal shareholder in Leary Organics, favors a third approach: renovating the old Leary Crossing Mill. All three plans involve approximately the same upfront investment. But the ongoing operating costs for the three plans are quite different.
Step 1: Explore the data for Leary Organics. Listen to George and Julie’s assessments about the mill designs and Leary’s market situation. Then, open the MS Excel spreadsheet for a summary of the data.
Step 2: Perform an analysis using the tools you learned in this chapter. Answer the following questions:
Question 1: What is the breakeven volume for each factory design? Is it less than the minimum projected demand? Is it less than the maximum projected demand?
Question 2: What is the profit of each plant at the minimum projected demand?
Question 3: What is the profit of each plant at the maximum projected demand?
Bonus Question: Which of the three designs will you recommend to Leary Organics? Why?