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Chan
TOPIC QUESTION - PAPER 1
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Chan
May 17, 2026 at 7:36:21 AM
May/June 2022
Version 3
4.0 Operations Management
4.2 Costs, Scale of Production and Break-Even Analysis
YOUR ANSWER
Should HBN choose Option 2, HBN will need to raise an additional $750,000, but will have more output compared to Option 1. However, there might be disagreements and miscommunication with the employees as they are used to a different leadership style. This might reduce output. If HBN chooses option 1, HBN may not meet the increasing demand of steel and lose out to competitors as it will take 6 months to complete extension. HBN should choose option 2 as HBN could adopt a laissez-faire approach to management and enable the new steel business to operate as usual. This will ensure that HBN increases its output to meet demand and increase its revenue.
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