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1 Giulia has learned quite a bit about the cost structure of operating a forge. She could take this information anduse it as leverage to negotiate a deal with another contract manufacturer. We can see the variablecosts are quite low; hence, another contract manufacturer might be interested in a price that is muchlower 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 u3.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 outsourcingarrangment when she is selling the pitons for $11.00 that there is little opportunity for her to develop aprofitable, 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 salesinto a healthy sustainable business.