Group A BYP 6-2 - BYP 6­2 a What is the difference in profit under each of the alternatives if the clocks are to be sold for $14.50 each to Kmart

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Unformatted text preview: BYP 6­2 a) What is the difference in profit under each of the alternatives if the clocks are to be sold for $14.50 each to Kmart? Buy from Silver Buy from Alpha Net Income Fixed Manufacturing Costs Purchase Price Total Annual Cost Sales if sold at $14.50 each Costs Profits at $14.50 each Star 5,000 55,000 $60,000 72,500 60,000 $12,500 Products increase/decrease 5,000 ­ 20,000 35,000 $25,000 $35,000 72,500 25,000 $47,500 b) The most important nonfinancial factors that Technology Plus should consider when making decisions are: ** The time period the alarm clock would generate popularity **The pricing over time(what would be cheaper) **If they have a company do it for them they would have to decide to do something with their employees **Customer Satisfaction c) Team A thinks that Technology Plus should purchase the remaining order due to Kmart from Silver Star untill t figure out what the best process is for the long run. The reason to our thinking is customer satisfaction. If the company is not yet that reliable why take the risk of having another recall and making the customers unsatified the customers are not satisfied then who will buy the product? So we think the best option is going with a reas priced company with a good quality record. Notes for problem: 5000 clocks ordered The company has therefore investigated the possibility of having anothe make the clocks for them. The clocks were bid for the Kmart order based $6.65 cost to manufacture: Circuit board, 1 each @ $2.00 2.00 Plastic case, 1 each @ $0.75 0.75 Alarms, 4 @ $0.10 each 0.40 Labor, 15 minutes @ $12/hour 3.00 Overhead, $2.00 per labor hour 0.50 Technology Plus could purchase clocks to fill the Kmart order for $11 fro Star, a Korean manufacturer with a very good quality record. Silver Star reduce the price to $7.50 after Technology Plus has been a customer for an order of at least 1,000 units per month. If Technology Plus becomes a customer” by purchasing 15,000 units per year, the price would be reduc to $4.50. Alpha Products, a local manufacturer, has also offered to make clocks fo Plus. They have offered to sell 5,000 clocks for $4 each. However, Alpha been in business for only 6 months. They have experienced significant tu labor force, and the local press has reported that the owners may face ta soon. The owner of Alpha Products is an electronic engineer, however, a the clocks is likely to be good. If Technology Plus decides to purchase the clocks from either Silver Sta all the costs to manufacture could be avoided, except a total of $5,000 in for machine depreciation. The machinery is fairly new, and has no altern when making decisions are: hing with their employees to Kmart from Silver Star untill they is customer satisfaction. If the other aking the customers unsatified? If best option is going with a reasonably possibility of having another company id for the Kmart order based on an estimated ll the Kmart order for $11 from Silver d quality record. Silver Star has offered to lus has been a customer for 6 months, placing Technology Plus becomes a “preferred ar, the price would be reduced still further lso offered to make clocks for Technology for $4 each. However, Alpha Products has ve experienced significant turnover in their that the owners may face tax evasion charges ctronic engineer, however, and the quality of clocks from either Silver Star or Alpha, d, except a total of $5,000 in overhead costs fairly new, and has no alternate use. ...
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This note was uploaded on 04/17/2011 for the course ACCOUNTING 490 taught by Professor Santos during the Spring '11 term at University of Phoenix.

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