Management of kayak model production
Starting from the second year of the simulation, a new kayak model can be developed every two years.
For each model in production, you have the option to continue or stop its production. If you choose to stop production, the model is then considered "discontinued." When a model is discontinued, only the existing stock remains available for sale. Please note that at the end of the year, the remaining inventory will be shipped to liquidators who buy it at 75% of the retail price. This strategy aims to completely eliminate the remaining stock and free up space in the warehouse for other models in production.
A discontinued model cannot be replaced by another, but it can be reintroduced in future years if desired. However, when a model is reintroduced, the targeted segment, that is, the type of kayak, cannot be changed. Thus, the maximum number of kayak types a company can have each year depends on the progress of the simulation, and this total includes discontinued kayaks.
- Year 2 = Maximum 2 kayaks
- Year 4 = Maximum 3 kayaks
- Year 6 = Maximum 4 kayaks
- Year 8 = Maximum 5 kayaks
Discontinued Models
When a model is discontinued, its cost of production is reduced to $0 for the current year, as no new production occurs, and no further costs are associated with this model.
Here are three important points to remember for discontinued models:
- Product Profitability Report: A very high gross margin may be observed. This is normal and is due to the cost of production being $0.
- Selling Price Calculator: Do not use it to set the selling price, as it is usually based on a standard cost of production, which is not the case for a discontinued model.
- Diagnostic and Consistency Report (if access was granted by the instructor): You may also notice a very high gross margin, which is normal due to the $0 cost of production. Other indicators related to the discontinued model should be interpreted with the understanding that this model was not produced during the current year.
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