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Decision Making in Companies

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Chimbell makes pickles and markets them in 500-gram tins. The full capacity of the plant is 120,000 tins per annum. The company charges $30 for each 500-gram tin. In the previous year, the company used only 50% of its capacity and the plant is presently operating at that level.
Direct material $12 per tin
Direct wages $3 per tin
Direct overheads $3 per tin
Fixed overheads $400,000

Due to poor quality of raw materials, the pickles were being spoiled and not accepted in the market. The stock is accumulating and can be disposed off at $15 per tin only. It is expected that with proper training of farmers for which $100,000 have to be spent and some R&D activity requiring further one-time expenditure of $50,000, the company can start production of pickle of acceptable quality and start marketing after a gap of 4 months. By closing all operations for 4 months fixed overheads will be reduced by $40,000. It has been further suggested that by reducing sales price by 10% and improving quality, capacity utilization can be increased to 80%.

As the manager of the company, you are required to decide whether the company should close down its operations for 4 months and go for improvement and whether any reduction in sales price is to be contemplated to achieve increased capacity utilization.

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Solution Summary

This solution involves a problem that involves decision making to continue or close operations, financial analysis, business continuity

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Please includes references, my company is Apple, the product used, use specified periods i.e 2009, 2010 comparison between the two. Any help would be greatly appreciated. Please use the information below as your guide.

By this time, you should have an organization selected and approved for your project.

In this module, we are going to have our first application to that project. Identify any activity in your organization where you can apply breakeven analysis. You must be able to define:

A unit of measurement for the activity
Revenue per unit for the activity
Variable costs for the activity
Fixed costs for the period in the activity

LENGTH: 2-3 pages typed and double-spaced.

The following items will be assessed in particular:

If you cannot identify specific actual amounts, make a reasonable estimate and apply the tool as if the data were factual. Estimates should be reasonable, justified and documented.

Your report should include:

The name and nature of the organization
The activity and time period you used
The inputs you used
Your results in an easy to read table format
Any benefits and implications from your results

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