Estimate the expected financial impact

Assignment Help Finance Basics

Reference no: EM1339648

ABC Company is considering replacing a metal gear with a plastic one. The plastic gear will save $0.75 per unit but will require an expenditure of $40,000 for special tooling (each year) to produce the gear. Annual sales are 80,000 units.

A. Should the company convert to the plastic gear? What is the expected financial impact?

B. Suppose that the plastic gear creates additional warranty cost due higher failure rates. During the first year the gear is in service (warranty period) there will be two additional failures for every 1,000 gears sold. The cost to the company is $50 per gear failure. Should the company still convert to the plastic gear? What is the expected financial impact?

Reference no: EM1339648

Questions Cloud

Explain union and the ada act : Explain Union and the ADA Act and Discuss the legality of these practices

Type of cost estimating-regression analysis technique used : In which type of cost estimating is regression analysis technique used?

Describe the business research and its purpose : Describe the business research and its purpose. What did the researchers conclude as a result of their research.

How to maintain asymmetry despite its fluid consistency : What types of member molecules may be distributed asymmetrically?how to maintain asymmetry despite its fluid consistency.

Estimate the expected financial impact : Suppose that the plastic gear creates additional warranty cost due higher failure rates. The cost to the company is $50 per gear failure. Should the company still convert to the plastic gear? Estimate the expected financial impact.

Explain discriminatory queries during job interview : Explain Discriminatory Queries During Job Interview and The Company also requires pre-offer medical examinations of some prospective employees

Development of englands colonies in new england : Compare the development of England's colonies in New England to those in the South. What were their similarities? What were their major differences?

How to add a coverslip over the drop of water : The molecules of all matter, particularly gases and liquids, are in constant vibration motion. As a result of this motion, molecules are continually colliding with one another, much like balls scattering over a pool table.how to Add a coverslip ov..

Explain how would equilibrium price and equilibrium quantity : If the airline industry was operating under other market structures, explain how would equilibrium price and equilibrium quantity differ

User Account

All Pages