1 giulia has learned quite a bit about the cost

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1 Giulia has learned quite a bit about the cost structure of operating a forge. She could take this information and use it as leverage to negotiate a deal with another contract manufacturer. We can see the variable costs are quite low; hence, another contract manufacturer might be interested in a price that is much lower than the 9.00 charged by Stanley. 1. Giulia is clearly intrigued by the option to own the forge. If she were to accept the contract offer ($10.50 per unit price; 4,000 u 3. Discuss how Giulia can use the results from question 2 to guide her decision making.
2 It should be obvious to Giulia that when it costs her $10.50 to produce a piton under the current outsourcing arrangment when she is selling the pitons for $11.00 that there is little opportunity for her to develop a profitable, sustainable business model….there is just not enough opportunity to increase volume. 3 Owning the forge would allow Giulia to enjoy a very significant contribution margin per unit ($11.00 - $1.74). With such a healthy contribution margin, if Giulia can find additional sales volume, she could turn her piton sales into a healthy sustainable business.

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