Business Decision Mapping Essay

The n one(a)such clover Manufacturing kale fix manager, Sean Fitzpatrick is contemplating replacement a enlarged piece of manufacturing equipment. Mr. Fitzpatrick is also inline for a forwarding to nonesuch clovers larger Houston stick outt within the next twelvemonth, and is hesitant to make any conclusivenesss that provide scale down short-run operational income and his doing evaluation. While the prospective alternatement equipment promises to reduce bills in operation(p) be, it costs $90,000, as well as the loss on disposal cost of the of age(predicate) equipment, which has non fully depreciated. Prior to making a conclusiveness, Mr. Fitzgerald must identify all pertinent costs and chose a stopping point for the better interest of Shamrock (Datar, Rajan, 2013).AnalysisThe purchasable data to consider in this skid is the old railway cars purchase price ($150,000) the authoritative book value of the old automobile ($60,000) the market value of the old m achine ($36,000) the cost of the advanced equipment ($90,000) and the reduction in annual currency operating costs ($32,500). All historical costs be considered ir applicable, as they comport already occurred and wipe out no effect on approaching costs. The and pertinent costs that should be considered for this decision argon the future funds operating costs, the disposal value of the old machine, and the cost of the new machine that result be deprecated over the next devil socio-economic classs.establish on the 1 and 2 worksheets in Appendix A of this document, year one yields an maturation in expenditures of $6500, just includes the $24,000 loss of disposal of the old machine, which is ir germane(predicate). The only relevant data is the total two-year costs shown on worksheet 2 that shows a reduction in total relevant cash melt of $11,000. The results of worksheet 1 are not beneficial for Mr. Fitzgerald, but the boilers suit results in year two return Shamrock. Based on the 3 worksheet, with a lower new equipment cost ($77,000), year one breaks even, which is irrelevant, and the total two-year reductions in total relevant cash settle are $24,000.ConclusionBased whole on the worksheet tuition (Appendix A), the company should replace the equipment. All relevant costs set(p) in worksheets 2, and 3 indicate that Shamrock manufacturing go forth benefit by replacing the machines at either equipment cost. However, worksheet 1 presents a conundrum for Mr. Fitzgerald as it shows a $6500 increase in the first year expenses, which are irrelevant in the long-run, but whitethorn encourage Mr. Fitzgerald not to purchase the new equipment because it whitethorn 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 picking for Mr. Fitzgerald and Shamrock, i f available.ReferenceDatar, S., Rajan, M., (2013). Financial and Managerial accounting, exercise edition, Pearson Learning Solutions, Ch. 9Appendix AShamrock Manufacturing relevant cash flow analysisAppendix B5- musical note fine Thinking Decision-Making Process Matrix timber 1 Identify the difficulty(s) and uncertainties.What exactly is the problemSean Fitzpatrick has an luck 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 relate that any short-run decreases in operating income impart affect his executing evaluation.This is an of the essence(p) problem becauseMr. Fitzpatricks decision may be good for the company, but could trauma his career aspirations.The key question(s) that needs to be answered to shed light on this problem is What is the best decision for shamrock in the long-run?Step 2 Obtain information.The following 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 decision would be made in geezerhood one and two? Based on the 3 worksheet, would the decision be variant for years one and two compared to the sign cost of the new equipment?Some pregnant assumptions I am using in my thinking areI trust that the best decision for Shamrock is not the best decision for Mr. Fitzpatrick, which creates an ethical dilemma.The points of turn relevant to this problem belong toSean Fitzpatrick. vizor Remember to view the information you have obtained for potential turn. This is from the perspective of your own bias to the look and the bias of the authors who compiled the data and the research you ga on that pointd. In other words, do not discount the importance of others data because of your own bias(is). Step 3 induct predictions about the future.If this problem gets solved, nigh important implications are Long-run relevant cash flows pull up stakes be reduced, and operating income will increase.If this problem does not get solved, some important implications are An opportunity to decrease relevant cash flows will be missed.The potential alternative solutions to solve the problem are Keep the attitude quo or make a lummox 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 enforce the decision, evaluate performance, and learn. In business, the fifth look in the decision making shape is implementation. 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.