III. If Giulia bought the foundry business, would the business be profitable? Support your answer with both a quantitative analysis and qualitative reasoning.
Giulia seems to be excited about the opportunity to own her own business doing something that she loves. There is a high level of uncertainty here in whether or not Giulia would make a profitable business. It seems that there is room for improvement in the current operations since all 6 workers were cross trained and they were currently only busy for about one weeks worth of labor time per month. Giulia does have an MBA and may be able to recognize ways to use the resources more efficiently and keep production costs down. Giulia will need to practice her strategic thinking to determine how to balance the resources on hand to make this situation work. If she can offer the units for $11.70 or higher, she may be able to maintain the business but she will need to drive down the production costs to sustain profits. If any equipment needs repairs or the building needs renovations, those costs are not going to be covered under her current pricing plan. Also, if production increases, variable costs may also increase so it will be important for Giulia to pay close attention to this.
Cost per Unit
Depreciation for previous year
Total Operating Costs
Breakeven Price would need to be at least $11.70
IV. What are the relevant risks for Giulia in this situation? What role does the quantitative analysis play is...
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