Package Design International (PDI) Is a Medium-Sized Company

Essay

Package Design International (PDI) is a medium-sized company.Typically,because of overload,its executives work 10- to 12-hour days.The president calls for reduction of the average period from order-entry date to delivery date.The P/OM department suggests building a supply chain simulator.The simulation would capture all factors that affect order to delivery times.Training and a problem-solving device are estimated to cost $25,000.The operations manager believes it will take 40 hours for each executive to learn how to use this simulator.There are five executives that would be expected to work with the simulator.The operations manager has told the president that the simulator would result in $250,000 of additional profit for PDI in the next year.Should the contract for the simulator be given? Assume FC = $25,000,vc = $ 125 per hour (for five executives) and Selling Price (or revenue) = $250 per hour.Solve for the number of hours to yield savings of $250,000 per year.