Week 8 Signature Assignment:
Sweet Bites Cakes Opportunity
Sweet Bites Cakes Opportunity Sweet Bites Cakes (a fictional company) is impressed with your midterm proposal. As a result, the owners of Sweet Bites Cakes want your recommendation on which of the following two equipment investment opportunities would be beneficial to the company.
Opportunity 1 A national fast-food chain has provided Sweet Bites Cakes with a request for a proposal to provide upscale individual mini-cakes packaged in clear plastic containers that use the chain’s label. The chain is willing to pay $1.50 per cake for a 3-year agreement guaranteed for 2.2 million cakes. There could be a possibility to extend the agreement depending on the success of the relationship. The cakes would be made using existing recipes and ingredients, but it would require a large investment in special packaging machinery of $500,000 with a 10-year life. Sweet Bites Cakes would expect to achieve a 15% net profit margin on the agreement.
Opportunity 2 Labeling is considered the primary bottleneck for the company. Some variety packs require especially heavy labor to assemble the different flavors, snap on the plastic lid, and affix the labels in the right place. Sweet Bites Cakes is also considering a new labeling machine (different from the machinery in Opportunity 1) with an estimated 5-year life. The machine would cost $500,000 and save an estimated $14,500 per month in labor cost. It is expected to increase throughput by $13,000 revenues per month with roughly 20% markup on incremental production costs (excluding new investment). Assignment *Analyze each of these business opportunities from financial, strategic, and risk perspectives. Provide a four- to five-page summary with supporting documentation. Use the following guidelines when making your recommendations: -Assess the opportunities in terms of increased profitability and return on investment. -Comment on strategic, technical, and risk factors that are relevant to this decision. -What action do you recommend for the company? Your summary should be written in the current APA Style for formatting and references. Include both a title page and reference list that includes at least two scholarly sources (your text can be one of the sources). See rubric for specific grading criteria. Points: 200
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