Efficiency and Cost of Production

Because the decision about relocating manufacturing operations to the United States is so
important, the board of directors at AutoEdge continues to systematically discuss every
aspect of the situation.
Demonstrate how metrics such as valuation, economic profit, and related terms are
measured and evaluated.
Explain the significance and implications of various economic theories pertaining to profit,
consumer choice, demand and supply, forecasting and optimization.
Compare and contrast how production analysis is carried out and be able to evaluate
production situations using economy of scale, elasticity and other analytic tools.
The following week, CEO Lester Scholl meets you for coffee to discuss next week's board
meeting.
"I'm hearing good things about you," he says. "Ingrid and George tell me you've been very
responsive and helpful."
"That's good to hear," you say. "I've enjoyed working with them."
"We're both busy, so I'll get right to the point," he says. "One of the main objectives of any
business is to be efficient. Without efficiency, the company is essentially losing money. Am I
right?"
"Absolutely," you say.
"What must AutoEdge do," he says, "to obtain economies of scale with production? How do
we know that it has achieved economies of scale? Conversely, how do we know if it is
achieving diseconomies of scale?"
"That's a good question," you say. "I can understand why you ask."
But before you can respond, Lester's cell phone rings. After a minute, he ends the call and
stands.
"I have to get back to the office to handle an emergency," he says. "Would you send me an
e-mail with an answer to my questions, please?"
"No problem," you say. "I'll get it to you before I leave work this afternoon."
"I appreciate it," he says. "Thanks."

Answer Preview………………..

The management and shareholders of most corporations are less concerned when the share price and earnings per share values are falling because these metric are not true indicators of either good or bad performance, since they are dependent on other factors. The measurement and evaluation of performance metrics such economic profit, return on invested capital, and valuation among others are considered appropriate indicators of the health of their interests. Also, CEOs such Lester Scholl of AutoEdge are more concerned about the measures that can be used to obtain and monitor economies of scale with production since a lack of efficiency is indicative of loss of financial resources. Additionally, the focus of today’s business people is the significance and implications of the various economic theories on different factors including profit, consumer choice, demand and supply, forecasting, optimization, and elasticity as it impacts the sustainability of their company……………….

APA 762 words