Omni Graphics case

Case: Omni Graphics is a small manufacturer of electronic products for use in graphics computers. The company has succeeded by being very innovative in product design. As a spin-off of a large electronics manufacturer (ElecTech), Omni management has a lot of experience in both marketing and manufacturing in the electronics industry. A long list of equity investors is betting that the firm will really "take off" due to the growth of specialized graphics software and …

…run while sales are still relatively low and since variable cost only differ by $2.50 and the new proposal has lower fixed cost it may be worth it. However in the long run when sales will increase Omni will want to go with the current plan because the variable cost is lower meaning they will get higher profits per unit. This means that Omni will gain a lot more in revenue going with the current plan.