Sands Corporation Essay
To: CEO, Sands Corporation
From: Management Trainee
Date: August 1961
Subject: Report on evaluating the options available for setting up a new plant either at Kimberly Street or Hampton.
There is a report enclosed specifying all the details for evaluating the setting up of the new plant either at Kimberly Street or Hampton.
I hope this report helps making your decision.
Located in the Midwestern part of the United States, Sands Corporation is a manufacturing company operating with three plants. Due to increasing government contracts there is a need for setting up a new plant, as there is no space and labour available in the existing firm.
Kimberly Street and Hampton are two options …show more content…
1. Land and labour
2. Government and future expansion
There are two options available-
1. Setting up a plant at Kimberley Street
2. Setting up a plant at Hampton
Evaluation of the options:
1. Kimberley Street:
Land and labour:
Kimberly Street has 2 acres of land available which costs $50000 and also meets the criteria of requirement of land needed (75000 square feet). The total capital cost is $651770 (exhibit 1). As this is an industrial area, the demand for the land in future will increase leading to high resale value.
Total labours available are 9600 out of which skilled are 1000. As the main plant is located nearby, re-location of the worker will be easier. The total labour cost is $2826000 (exhibit 2).The labours at Kimberley Street would form union, which would make it impossible to meet the demands on time, leading to loss in government contracts in the future. The total operating cost is $3255640 (exhibit 3), lesser in comparison with Hampton. Hence saves up to $298860 annually.
Government and future expansion:
Availability of surplus labours and land would help to meet present demand and increase contracts in the future. This would build good relations with the government and not pose a problem for future expansion.
2. Hampton Street:
Land and labour:
10 acres of land is available costing $20000. The total capital cost incurred is $620480 which is less than that of Kimberley Street by