Case Assignment 2

Satisfactory Essays
Dateesha Blakely
PROC 5830
22 April 2011
Wk 7 Case 2

Case of the Pricing Predicament
Case Assignment

Calibrated manufacturing makes an electronic component that is in great demand. The component sells for $20 each. Calibrated’s current capacity is 10,000 units per week. For the last few months, however, the company has been receiving new orders at a rate of 14,000 units per week, and now has a substantial backlog. The company expects this order rate to continue, if it maintains price. Calibrated’s current operating data follows:
Sales Revenue $200,000
Variable Costs $100,000
Fixed Costs $80,000
Pretax Profit $20,000
For each incremental addition of 500 units of output weekly, Calibrated would need to purchase new equipment that would add $1,500 to weekly fixed costs. No other fixed costs would become incremental for this price change. Labor costs currently account for half of all variable costs. Additional hires, however, are expected to be more costly than the average of current employees because of their lower productivity. Although new hires are paid (wages + fringe benefits) only 80% of the current average, they can produce only two-thirds as much output per hour. Consequently, labor costs for additional output with new hires is 20% higher than the current average.
Calibrated is debating whether to keep its current price and expand to meet the demand or to raise its price to reduce demand somewhat before deciding whether or not to expand.
1. How much would Calibrated’s weekly profits increase if it expanded to meet the entire amount of its current excess demand?
New incremental costs:

Fixed Costs = 1500 x 4000/500 = $12,000 (every 500 units cost $1500, so incremental 4000 units would cost 1500 x 4000/500)

Variable cost per unit = $10

Current Labor cost per unit = 1/2 of variable cost = $5

New Labor cost per unit for incremental units = $6 (20% higher than current $5)

New Variable cost per unit =$11

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Assignment 2 Case

    • 487 Words
    • 3 Pages

    Toyota’s European Operating Exposure • It was January 2002, and Toyota Motor Europe Manufacturing (TMEM) had a problem – Mr. Toyoda Shuhei, the new President of TMEM was on his way to Toyota Motor Company’s (Japan) corporate offices outside Tokyo to explain the continuing losses of European manufacturing and sales operations – The CEO of Toyota Motor Company, Mr. Hiroshi Okuda, was expecting a proposal from Mr. Shuhei to reduce and eventually eliminate the European losses. The situation was intense…

    • 487 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Case assignment week 2

    • 530 Words
    • 2 Pages

    Mia Fernandez Human Resources Management Case Assignment Week #2 Case Study 1: Job Candidate Assessment Tests Go Viral: 1.The advantages of using virtual tryouts are better-qualified candidates; faster recruiting, lower turnover among employees hired, allows candidates to have a more realistic job preview, and makes candidates feel like they are being chosen for the position on more than just their personalities or how they performed during the interview. The disadvantages are a candidate that…

    • 530 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Assignment 2: Case Study

    • 686 Words
    • 3 Pages

    qualified as head of household? Can Brett and Kathy file tax income separately? What is the most appropriate filing status for Brett and Kathy? Under code section §2(b)(1), a taxpayer is eligible for head of a household filing status “if, and only if, such individual is not married at the close of his taxable year”. Code section §2(b)(2)(A) provides that an individual who is not married must get a decree of divorce or separate maintenance and separate from his or her spouse. Based on the statement…

    • 686 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Case Analysis #2 BMT855DD By: Ben Ashkin Greg Mortenson: A Leader Under Fire 1 I would definitely describe Greg Mortenson as an “Authentic Leader”. In our text authentic leadership is described as a type of leadership that can be nurtured, and develops over a lifetime, can be triggered by major life events, and that a leader’s behavior is grounded in strong ethics. The definition continues on to say that there are four authentic leadership components: Self-awareness, Internalized…

    • 656 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Assignment 2

    • 387 Words
    • 2 Pages

    the Cardillo Travel Systems case in your textbook. Write a four to five (4-5) page paper in which you: 1. Explain the Securities and Exchange Commission's rationale to charge Cardillo executives with each of the following violations: a. making false representations to outside auditors b. failing to maintain accurate financial records c. failing to file prompt financial reports with the SEC d. violating the insider trading provisions of the federal securities laws 2. Determine who was in violation…

    • 387 Words
    • 2 Pages
    Satisfactory Essays
  • Better Essays

    Assignment 2

    • 1946 Words
    • 10 Pages

    Kethabile Mhlongo 36402052 [LIN3705] Assignment [2] Name: Kethabile N Mhlongo- Ramolodi Student Number: 306402052 Course Code: LIN3705 Assignment Number: 2 Date: August 2014 Declaration: I, the undersigned, hereby declare that this is my own and personal work, except where the work (s) or publications of others have been acknowledged by means of reference techniques. I have read and understood Tutorial Letter ENG2ALL/301 regarding technical and presentation requirements, referencing techniques…

    • 1946 Words
    • 10 Pages
    Better Essays
  • Satisfactory Essays

    Assignment 2

    • 270 Words
    • 2 Pages

    Information Technology Assignment 2 Individual assignment - 100 marks (Represents 20% of the final grade) Assignment submission date- 08th March 2015 (8.30am) Enterprise Applications and Relation Management IM 506 Vis.Lec- Sanjeeva Perera Individual Assignment Date of Submission 08th March 2015 Grading This assignment is worth 20% of the marks for the course: 1. Does IT Matter? Written report consisting of 5-7 pages. The marks allotted for each part of the assignment are shown below in parentheses…

    • 270 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Assignment 2 2

    • 558 Words
    • 8 Pages

    BMA 253 Intermediate Accounting Assignment #2 PART I Directions: 1) Complete the table below. 2) Calculate the estimated bad debts using aging of receivables method. Age Balance 1-60 days 61-120 days 121-180 days Over 180 days $80,000 Probability Uncollectible of Default 2% $70,000 4% $40,000 8% $32,000 11% Total PART II Directions: 1) Calculate the inventory cost for both periodic and perpetual method LIFO and FIFO using the following information and table below to fill in the shaded…

    • 558 Words
    • 8 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Assignment 2

    • 256 Words
    • 1 Page

    Assignment 2 Outline challenges associated with mainstream project cycle management models in agricultural projects. Discuss the alternative approach suggested by Hart, Beukes and Hart (2005). To answer this question, you need to go through study unit 2 (p14-25) of your study guide and then p110 -127 of your reader. These are the main references you should use. Part 1 of the question: Outline challenges associated with mainstream project cycle management models in agricultural projects First…

    • 256 Words
    • 1 Page
    Satisfactory Essays
  • Powerful Essays

    Assignment 2

    • 2642 Words
    • 10 Pages

    49941771 THL3701 49941771 THL3701 Assignment 2 Unique number: 771426 Please note: Extension requested from Mr A.P Roux on 22/04/2014 1 Assignment 2: 771426 49941771 THL3701 Assignment 2: 771426 Question 1 How Apartheid affects us all First-person texts like mark Behr’s “The Smell of Apples” is written from one character’s point of view. In this case it is from the perspective of an eleven year old Marnus Erasmus with sections from him when he is older and fighting in a war. We can see how…

    • 2642 Words
    • 10 Pages
    Powerful Essays