What is the expected added profit from the challenger line

Reference no: EM132378986

Assignment - Problems and Discussions

1. Problem - Vulcan Swimsuit Company is considering dropping its line of women's beach robes. A recent product income statement for the robe line follows:

Revenue	$950,760
Cost of goods sold	867,840
Gross margin	88,920
Selling and administrative expenses	136,800
Net loss	$(47,880)

Factory overhead accounts for 35 percent of the cost of the goods sold and is one-third fixed. These data are believed to reflect conditions in the immediate future.

Required: Should the line be dropped?

2. Problem - Taylor Electronics, Inc. (TEI), has been approached by a new customer who wants to place a one-time order for a component similar to one that TEI makes for another customer. Existing sales will not be affected by acceptance of this order. TEI has a policy of setting its targeted selling price at 60 percent over full manufacturing cost. The manufacturing costs and the targeted selling price for the component currently being made are as follows:

Direct materials	$2.30
Direct labor	3.60
Variable manufacturing overhead (75% of direct labor cost)	2.70
Fixed manufacturing overhead (150% of direct labor cost)	5.40
Total manufacturing cost	$14.00
Markup (60% of full manufacturing cost)	8.40
Targeted selling price	$22.40

TEI has excess capacity to produce the quantity of the component desired by the new customer. The direct materials used in the component for the new customer would cost the manufacturer $.25 less than those in the component currently being the c made. The variable selling expenses (packaging and shipping) would be the same as for the component currently being made, or $.90 per unit.

Required: What is the minimum unit price at which TEI would be willing to accept the special order?

3. Case - Baldwin Bicycle Company

Questions -

1. What is the expected added profit from the Challenger line?

2. What is the expected impact of cannibalization of existing sales?

3. What costs will be incurred on a one-time basis only?

4. What are the additional assets and related carrying costs?

5. What is the overall impact on the company in terms of (a) profits, (b) return on sales, (c) return on assets, and (d) return on equity?

6. What are the strategic risks and rewards?

7. What should the company do? Why?

4. Discussion - With alternative choice decisions, managers seek to choose the alternative most likely to accomplish the objectives of the organization. In addition to ROI, discuss other business objectives that may be important in the choice of the best alternative.

Submission Instructions:

Any written explanations should use complete sentences, and appropriate grammar, punctuation, spelling and word usage.
Your initial post should be at 200-300 words, formatted and cited in current APA style with support from at least 2 academic sources.

Attachment:- Case.rar

Reference no: EM132378986

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