Reference no: EM132476524
Question - Blackwater Boat Company is a niche manufacturer that makes two types of fiberglass boat hulls - (a) a 14' mono-hull skiff, and (b) a 21' fiberglass catamaran with cabin. The completed hulls are sold to other companies that dress out the boats and sell them to retailers. Each boat is formed using molds, then slow-cured in a large industrial oven. Due to cooling times and maintenance, the ovens can be fired for only 2,000 hours per year. Applicable information for each boat appears below. Usually the company operates at full capacity, selling roughly 600 mono-hulls and 200 "cats" each year. Also, assume the company has $120,000 per year in fixed costs that it chooses to allocate equally to each category of boats.
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14' Mono-hull
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21' cat with cabin
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Unit Sales Price
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$800.00
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$1,200.00
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Unit Variable Costs
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500.00
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700.00
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Allocated Total Fixed Costs
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60,000.00
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60,000.00
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Allocated Per Unit Fixed Costs
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100.00
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300.00
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Oven Time Req'd
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2 hours.
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4 hours.
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(a) Assume this has been a bad year for sales, and the company has excess capacity. It is approached by a wholesaler that offers to make one-time purchase of 14' mono-hulls for a special anniversary boat. It offers to buy 200 boats, and pay $600 for each one. Does the information provided here suggest that the company should accept the offer? Provide the impact on profit, explain why, and include supporting figures.
(b) Now assume the company is operating at its normal capacity, which uses all of the available oven time. In fact, it has more offers to purchase than it can handle. It has full price offers for up to 900 mono-hulls and up to 300 "cats." In order to maximize profits, explain which offers should it accept (how many of each boat) and show your work.
Use either a Word document or an Excel document to show your calculations and explanations.