Meridian Telescopes
Meridian Telescopes: Production Planning
ACTG 2020 - Section S – Group 6
To: Cathy Kain, President of Meridian
Re: Production Planning
Overview
Meridian has been manufacturing fine telescopes for 80 years and has developed a well-earned reputation for quality craftsmanship. The company itself produces and sells two distinct lines of telescopes, which are produced in its 200,000 square feet facility. Furthermore, both lines have been developed to appeal to distinct target audiences who have an interest in the company’s products. The older line, for which there has been steady demand, consists of small professional telescopes that ultimately have laid the foundation for Meridian’s strong reputation. Following the success of this line, the company pursued the development of the Amateur telescope line, targeting households that possess a desire for the product, but are unable to meet the price demand. The company is now planning to further expand its product line and develop binoculars, of which management believes there is growing demand and predicts initial sales ranging from 50,000 to 100,000 units. The difficulty that management is facing is that the production process would require additional manufacturing space. The production between the two established lines have already reached capacity, and management is now faced with the problem of devising a plan to organize production in such a way that will ultimately maximize their profit. As a criteria to the following analysis, our group of accountants has evaluated the incremental changes in profits under the alternatives that will be discussed shortly. As a result of this evaluation we have provided management with a guideline to implementing a new production process to meet their needs. Prior to the analysis it is important to understand that only the costs that are relevant are used to calculate the analysis.
Analysis
Initially, we began with examining the profits associated with each
ACTG 2020 - Section S – Group 6
To: Cathy Kain, President of Meridian
Re: Production Planning
Overview
Meridian has been manufacturing fine telescopes for 80 years and has developed a well-earned reputation for quality craftsmanship. The company itself produces and sells two distinct lines of telescopes, which are produced in its 200,000 square feet facility. Furthermore, both lines have been developed to appeal to distinct target audiences who have an interest in the company’s products. The older line, for which there has been steady demand, consists of small professional telescopes that ultimately have laid the foundation for Meridian’s strong reputation. Following the success of this line, the company pursued the development of the Amateur telescope line, targeting households that possess a desire for the product, but are unable to meet the price demand. The company is now planning to further expand its product line and develop binoculars, of which management believes there is growing demand and predicts initial sales ranging from 50,000 to 100,000 units. The difficulty that management is facing is that the production process would require additional manufacturing space. The production between the two established lines have already reached capacity, and management is now faced with the problem of devising a plan to organize production in such a way that will ultimately maximize their profit. As a criteria to the following analysis, our group of accountants has evaluated the incremental changes in profits under the alternatives that will be discussed shortly. As a result of this evaluation we have provided management with a guideline to implementing a new production process to meet their needs. Prior to the analysis it is important to understand that only the costs that are relevant are used to calculate the analysis.
Analysis
Initially, we began with examining the profits associated with each