Albatross Break-Even

Albatross Anchors is a small, family owned business that has been in operation since 1976 when it began manufacturing bell/mushroom anchors for fresh-water applications. In 1989, the company decided to begin producing a secondary style of anchor which was designed for a salt-water application and expanded their operations at that time. They have grown at a rapid rate since and are currently at the crux of decisions that will impact the direction and long term viability of the company. This study seeks to review the opportunities that exist in the areas of productivity, profitability, and efficiency with respect to not only the layout of the manufacturing process but also with the manner with which they conduct their daily business operations both independently and cooperatively on site. Additionally, it seeks to provide potential solutions to the current problems and create processes that will continue to support the manufacturing goals of the organization.
Question One
Based on the information presented in the scenario/case study discuss Albatross Anchor’s competitiveness in relation to (please address all items in the below list and provide support for your conclusions):
1.   Cost
a)   Cost of Production: The current cost of production for the two different anchors are $8 per anchor for the bell/mushroom type, and $11 per anchor for the snag hook anchors.
b)   Economies of Scale in material purchasing: Due to the limited areas of warehousing the material, economies of scale is not realized. The limitation of total area and the inefficiencies that are currently in place are preventing Alabatross Anchor from appreciating the profits available to companies that do not have the same restrictions. Because they are running inefficiently, they are not able to achieve capacity output maximization. “The capacity output is a potential output which may be equated to a maximal output or an economically-derived output given the stock of capital and state...