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Differential analysis: A case study

Question

Task: Consider the below-given case for conducting the differential analysis. You should provide valid recommendations for each question raised in the task described below.

Answer

Introduction
The differential analysis could reveal the practical aspect and business potential of manufacturing or buying the product. The magnitude and accurate impact of making either decision would be determined by conducting the accurate calculation (Wells et al., 1980). The authorities in the company must perform this calculation. It would help the company in generating a higher magnitude of revenue.

Impact of deciding whether to buy or manufacture the units

Particulars

Total of 8000 units

 

Per Unit

 

 

Make

Buy

Make

Buy

Fixed Overhead

16000

2

 

 

Purchase Price

128,000

16

 

 

Variable overhead

32,000

4

 

 

Direct material

40,000

5

 

 

Direct labor

32,000

5

 

 

Total relevant cost

120,000

128,000

15

16

The difference in favor of making

8,000

1

 

 

The table provided in the above section of this article on differential analysis details down the overall calculation that would help the company authorities in generating a higher level of revenue. It is clear from the above calculation that producing the units themselves would be more profitable for the company. If the company decides to buy the whole product, it has to bear the loss of $1 per unit. Only after careful evaluations of the involved cost factors that decisions in between buying and manufacturing could be effectively analyzed by the management(Trapnell et al., 2013).From the differential analysis conducted in the above section, it could be analyzed that producing the units themselves is more apt for the company.

Approach to the problem
The management of the company could take two different approaches in this context. The company has the option to either buy the products or to manufacture the products. Buying the products would create a significant change in revenue for the company. However, there is a positive aspect of buying the products since it would save a significant amount of time for the company (Love et al., 2014). The company could significantly save its effort and time if the whole manufacturing process could be handed over to the outsourcing companies. The approach would maximize the profitability of the whole business. However, the company should choose the process of manufacturing if they possess the appropriate facilities for it since it generates a very high profit. The approach would increase the company's financial position and higher stability (Pimentel et al., 2017)If the company is not in dire demand for profit, it could select the approach of outsourcing to mitigate temporary and permanent costs. Thus, the fluctuation of the revenue would not affect the company in a lean season since the profit generation would continue without higher investment. 

The viability of making the option could be calculated easily by referring to the calculation provided in the above section of this article on differential analysis. It would help the company in calculating the real magnitude of the impact made in the profit-generating ability. The company could generate $8000 revenue from 8000 units since it makes $1 from each unit manufactured. Hence the option of manufacturing is best for the company. By conducting the proper calculation with the information provided, the authority of the company can put in extra efforts to generate higher profit at a very less cost(Ramsay, 1996). The company would get high returns when it acquires the ability to provide high output even at very low investment. The company could easily meet the high demand of the consumer if the facilities are maintained properly.

Differential analysis

The concepts which support the relevant understanding
As repeatedly mentioned through thisarticle on differential analysis, the manufacturing process would generate a higher level of revenue. It would also increase the company's financial stability and the position of the company with an increased level of production (Baran et al., 2006). However, there is a risk that the manufacturing process of the company would lose its potential by the sudden decline of the products among the customers. The investment options would also diminish before the stakeholders in such instances (Katajamaa& Oreši?, 2005). The cost of production would go down significantly in the case of increased demand for the product among the consumers. This would, in turn, increase the revenue to avery high level, which would sustain the fierce competition among them.

Recommendation
It is highly recommended that the company opt for manufacturing the products since each unit would generate an extra $1 of revenue per unit. Thusthe profit would surmount to $8000 for 8000 pieces. Thus, the product's total cost would substantially reduce since it would generate a very high amount of revenue. Hence, as per the present differential analysis, it is highly recommended to opt for the manufacturing process compared to that of buying the products.

References
Baran, R., Kochi, H., Saito, N., Suematsu, M., Soga, T., Nishioka, T., ... & Tomita, M. (2006). MathDAMP: a package for differential analysis of metabolite profiles. BMC bioinformatics, 7(1), 1-9.

Katajamaa, M., & Oreši?, M. (2005). Processing methods for differential analysis of LC/MS profile data. BMC bioinformatics, 6(1), 1-12.

Pimentel, H., Bray, N. L., Puente, S., Melsted, P., & Pachter, L. (2017). Differential analysis of RNA-seq incorporating quantification uncertainty. Nature methods, 14(7), 687.

Ramsay, J. O. (1996). Principal differential analysis: Data reduction by differential operators. Journal of the Royal Statistical Society: Series B (Methodological), 58(3), 495-508.

Trapnell, C., Hendrickson, D. G., Sauvageau, M., Goff, L., Rinn, J. L., & Pachter, L. (2013). Differential analysis of gene regulation at transcript resolution with RNA-seq. Nature Biotechnology, 31(1), 46-53.

Wells, R. O. N., & García-Prada, O. (1980). Differential analysis on complex manifolds (Vol. 21980). New York: Springer.

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