Legacy product that company was built on over thirty years

Reference no: EM131947121

Tom and Jenna are managers at a company with $1.9m in total annual sales. The company has three product lines. Product one is the legacy product that the company was built on over thirty years. Product two is a line that was developed by the previous owner. Product three was developed by Jenna over the past five years. Annual sales on product three just reached $300,000. Product one sales have been steady over the past five years at $900,000. There is tension inside the company as each manager wants to pursue a different strategy. Tom wants to invest in capacity to make more of product one. Jenna believes that the future growth of the company lies in continuing to develop product three. You have been called in to assist in analyzing their decision. The company keeps financial records in Quickbooks. You request excel outputs of the records and get to work. After a few hours you are able to calculate that the variable costs for the three products are $630,000, $560,000 and $90,000 respectively. What does this mean, and how do you proceed with Tom and Jenna?

Reference no: EM131947121

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