Management_Accounting_Case_2_Winter_2010

Management_Accounting_Case_2_Winter_2010 - MANAGEMENT 122...

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MANAGEMENT 122 WINTER 2010 M ANAGEMENT A CCOUNTING D ANNY S. L ITT CASE ASSIGNMENT 2 Page | 1 Matthew Ryan, CFO of Bags & Purses, Inc., opened the company confidential envelope on his desk. It contained a draft of a competitive bid for a contract to supply duffel canvas to the U.S. Navy. The cover memo from Bags’ CEO asked Mr. Ryan to complete the bid before it was submitted. The bid and its supporting documents had been prepared by Bags’ sales staff. It called for Bags to supply 100,000 yards of duffel canvas per year for 5 years. The proposed selling price was fixed at $30 per yard. Mr. Ryan was not usually involved in sales, but this bid was unusual in at least two respects. First, if accepted by the Navy, it would commit Bags to a fixed-price, long-term contract. Second, producing the duffel canvas would require an investment of $1.5 million to purchase machinery and to refurbish Bags’ plant in Pleasantville, North Carolina. Mr. Ryan set to work and by the end of the week had collected the following facts and
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This note was uploaded on 04/28/2010 for the course MGMT 260510200 taught by Professor Davidlitt during the Winter '09 term at UCLA.

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