ACC560 Communication activity ANSWERS

ACC560 Communication activity ANSWERS - Week 4...

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Week 4 Communication activity: BYP 6-5 Course: Managerial Accounting (ACC 560) Communication Activity: BYP6-5 Westfield 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 two years. Ralph Sampson, the company CEO, wants 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. Instructions: Write a short memo to Ralph Sampson describing the analysis that the company should do before it makes this decision and any other considerations that would affect the decision. Answer: The CEO Westfield Corporation Sub: Decision for dropping the traditional fishing anchor product line Dear Mr. Ralph, I am acknowledged that you intend to subtract the traditional fishing anchor line so that the company can utilized the available capacity to produce more high-end yacht anchors for increasing net income. In any case, the costs and benefits of dropping a product line need to be compared and contrasted before making a decision. Some analyses should be made as follows, before your company makes this decision. 1.
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ACC560 Communication activity ANSWERS - Week 4...

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