ZuoTi.Pro
Question

“Easton Corporation makes two different boat anchors — a traditional fishing anchor and a high-end yacht...

“Easton Corporation makes two different boat anchors — a traditional fishing anchor and a high-end yacht anchor — using the same production machinery. The contribution margin of the yacht anchor is three times as high as that of the other product. The company is currently operating at full capacity and has been doing so for nearly 2 years. Bjorn Borg, the company’s CEO, want to cut back on production of the fishing anchor so that the company can make more yacht anchors. He says that this is a “no-brainer” because the contribution margin of the yacht anchor is so much higher.”

(Weygandt, Kimmel, & Kieso, 2012).

Instructions

As a team, explore the factors that Easton management should consider before making their final decision. Write a 1-page memo to Bjorn Borg describing the analysis that the company should perform. Be sure to address the following in your analysis:

  • What role might contribution margin per unit of limited resource play in this decision?

  • Should the marketing department be involved in the decision-making process? How important is consumer demand?

  • Should the company consider expanding their production facilities or purchasing additional equipment?

  • How might this change affect their company brand or the customer's perception of their brand? Will they be appealing to a different market by only offering yacht anchors?
business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Answer: For limited resource contribution margin per unit could play a role in the decision. Identifying how much of the profits are being used to cover costs and what amount is left over to be considered profit would be a factor in many financial business decision, in my opinion! I think that the marketing department should be a key role in the decision. They know firsthand how much it would cost when it comes to the beginning. By that, I mean they are more knowledgeable on the current costs involved in marketing, like putting the product or idea out there. How much does a commercial slot cost? That would be something marketing would be able to answer. How much is a billboard? Again, a marketing question. I believe marketing plays a major role in business. There could be two companies, one could rely on word of mouth, while the other adds marketing to the company. The one with marketing is going to be seen more, heard about more, etc. They play a key role in the business structure I dont want to go deep into previous courses that involve demand, but demand is so important. If you have a product that is comparable to 100 different products, there is a lower chance you will succeed. If what you offer is only available from, lets say, 5 products, you have a much better chance at success. Look at gasoline, which is something we can all relate to. As petroleum supply increases, we tend to see a drop in price as a consumer. As the supply decreases, we tend to see an increase in cost as a consumer. This is an example of supply and demand. Gasoline is practically a necessity for most. As we use it up, it becomes more expensive, as it becomes more available, the price tends to drop! Not only because we have more of it to go around, but also because the suppliers are dealing with competition. They know that the lower their prices are, the more likely they are to get more customers, and all other chains will follow, dropping their own prices are far as they can to meet their profitable needs! I think that they should do a pros and cons analysis of expanding production vs purchasing new equipment. From an outside view, I would lean towards expanding production along with purchasing new equipment. They are already at 100% production. so it is obvious that they are selling enough to make profit Increasing production will give them more cash flow, and increase the costs involved. Purchasing new equipment does the same. They will have to first spend money to purchase the equipment, but that equipment will be a positive thing for them. They need to weigh the options and estimate the inflow and outflow. By doing this, they can see if the decision is estimated to increase overall the income, or if it will ultimately hurt them Created by Universal Document ConverterThis will depend on the current comments from consumers. Do they wish they saw production of anchors from this company? They could find the answer to this question by considering the audience and how they feel about it. Is there another anchor that customers purchase now from other businesses that they would more than likely keep purchasing even if this new production can to pass? If the fishing anchor is the one item they have seen as their it item, they should probably not decrease production. If they want to produce the yacht anchor, they should just add it to their production and keep the fishing anchor production the same. They see that customers purchase and like that product, so why break what isnt broken? The reason that the yacht anchor has a higher contribution margin is probably because it is a high-end product. This also means it will have a high retail price. Most people will spend less when they can or have an opportunity. If the store next door has a comparable yacht anchor for 25% less in price, they wont get that sell in most cases. The people who rely on this company for fishing anchors could turn their heads to them if they see a drop in supply. If they are continuing to run out because they decreased production, some of their customers who were loyal because they always had the fishing anchors when they needed them will find other means to get the anchors. Then, if the company decided to bring production back to the normal and current rate, those customers may be hesitant to come back because they are seen as not as reliable as before Created by Universal Document Converter

0 0
Add a comment
Know the answer?
Add Answer to:
“Easton Corporation makes two different boat anchors — a traditional fishing anchor and a high-end yacht...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • (Please show calculations for study purposes) Outdoor Luggage, Inc., makes high-end hard-sided luggage for sports equipment....

    (Please show calculations for study purposes) Outdoor Luggage, Inc., makes high-end hard-sided luggage for sports equipment. Data concerning three of the company’s most popular models appear below. Ski Guard Golf Guard Fishing Guard Selling price per unit $ 230 $ 330 $ 265 Variable cost per unit $ 90 $ 150 $ 105 Plastic injection molding machine processing time required to produce one unit 4 minutes 10 minutes 5 minutes Pounds of plastic pellets per unit 5 pounds 11 pounds...

  • PF Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. Data concerning...

    PF Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. Data concerning these products appear below:                                                                                        V                      M                     N Normal Annual Sales Volume                                     100000            200000            400000 Unit Selling Price                                                         $1.65              $1.50             $0.85 Variable Expenses per unit                                         $1.25              $0.70             $0.25 Total Fixed Expenses are $400,000 per year. All the three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptable numbers of customers. The...

  • Storage Solutions produces plastic storage bins for household storage needs. The company makes two sizes of...

    Storage Solutions produces plastic storage bins for household storage needs. The company makes two sizes of bins: Large (50 gallon) and Regular (35 gallon) Demand for the product used to be so high that the company could sell as many of each size as it could produce. The same machinery is used to produce both The machinery is available for only 3,000 hours per period. The company can produce 10 Large bins every hour compared to 15 Regular bins in...

  • Storage Solutions produces plastic storage bins for household storage needs. The company makes two sizes of...

    Storage Solutions produces plastic storage bins for household storage needs. The company makes two sizes of bins: Large (50 gallon) and Regular (35 gallon). Demand for the product used to be so high that the company could sell as many of each size as it could produce. The same machinery is used to produce both sizes. The machinery is available for only 3,000 hours per period. The company can produce 10 Large bins every hour compared to 15 Regular bins...

  • Make-or-Buy, Traditional Analysis Morrill Company produces two different types of gauges: a density gauge and a...

    Make-or-Buy, Traditional Analysis Morrill Company produces two different types of gauges: a density gauge and a thickness gauge. The segmented income statement for a typical quarter follows. Density Thickness Gauge Gauge Total Sales $ 204,000 $ 108,800 $ 312,800 Less variable expenses 108,800 62,560 171,360 Contribution margin $ 95,200 $ 46,240 $ 141,440 Less direct fixed expenses* 27,200 51,680 78,880 Segment margin $ 68,000 $ (5,440) $ 62,560 Less common fixed expenses 40,800 Operating income $ 21,760 * Includes depreciation....

  • Make-or-Buy, Traditional Analysis Morrill Company produces two different types of gauges: a density gauge and a...

    Make-or-Buy, Traditional Analysis Morrill Company produces two different types of gauges: a density gauge and a thickness gauge. The segmented income statement for a typical quarter follows. Density Gauge Thickness Gauge Total Sales $ 201,000 $ 107,200 $ 308,200 Less variable expenses 107,200 61,640 168,840   Contribution margin $ 93,800 $ 45,560 $ 139,360 Less direct fixed expenses* 26,800 50,920 77,720 Segment margin $ 67,000 $ (5,360) $ 61,640 Less common fixed expenses 40,200 Operating income $ 21,440 * Includes depreciation....

  • Petrell Inc. is a wholesale distributor supplying a wide range of high-end cooking knives for the...

    Petrell Inc. is a wholesale distributor supplying a wide range of high-end cooking knives for the professional chef. Petrell has an enviable reputation for quality of its products. The demand for Petrell ’s products is so great that at times Petrell cannot satisfy the demand and must delay or refuse some orders, in order to maintain its production quality. Additionally, Petrell purchases some of its products from outside suppliers in order to meet the demand. These suppliers are carefully chosen...

  • NTM Corporation was formed on January 1, 2013 and the company has been growing steadily since...

    NTM Corporation was formed on January 1, 2013 and the company has been growing steadily since inception. The Chief Financial Officer, Myrna Snowflake, has hired you to perform some cost-volume- profit analysis to determine what changes can be made to increase profitability. She has provided you with the following traditional income statement for 2017. Total sales volume for 2017 was 600,000 units. The relevant range for NTM Corporation is 400,000 – 700,000 units. Requirements: Total sales volume for 2017 was...

  • Please write an 1. executive overview of the above case study. 2. in detail, what is...

    Please write an 1. executive overview of the above case study. 2. in detail, what is the critical issue or problem in the above case study. 3. please provide a detailed analysis of the cause of the issue or problem in the above case study. 國connect VIDEO CASE 1 Chobani: Making Greek Yogurt a Household Name Everybody should be able to enjoy a pure, simple cup of yogurt. And that's what Chobani is," says The very first cup for sale...

  • Project is about "House of Kaviari," and the industry is Caviar Industry. I only want Part.6...

    Project is about "House of Kaviari," and the industry is Caviar Industry. I only want Part.6 "Identify Critical Issues and Priorities" BUSINESS STRATEGY ANALYSIS REQUIRES THE FOLLOWING: 1. Identify strategic goals. – A firm's strategic goals drive business strategy and address the key success factors of the industry. Strategic goals often include the vision or mission statement for the business. They should also set the direction and standard for financial and market results against which actual performance can be measured....

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT