Morrow%20company%20solution - Assignment#2 Morrow Company...

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Assignment #2 - Morrow Company Solution 1. The target cost, at the price of $1,500 and the desired margin of 20% would be TC = $1,500 - .2 x $1,500 = $1,200 2. Currently With Cost Reductions Savings Manufacturing Cost $1,000 $835 $85-25+105 = $165 Marketing Cost 200 200 General & Admin. Cost 225 175 $50 Total Cost $1,425 $1,210 $215 The cost savings of $215 are not sufficient to get the product total cost down to the desired target cost of $1,200. However, given that National might be willing to pay a higher price and Morrow has a quality reputation on their side, Morrow might be able to negotiate a slightly higher price with National and should try that tactic. Even if National won’t move from the $1500 price, the cost difference is relatively small, so it might be prudent to pursue the order with the hope of getting repeat business (particularly if Morrow has excess capacity – some profits are better than none – with no excess capacity it would not be a good strategy). Moreover, if National goes with
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This note was uploaded on 03/03/2010 for the course MGMT 301 taught by Professor Johnson during the Spring '10 term at Acadia.

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Morrow%20company%20solution - Assignment#2 Morrow Company...

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