If TRIM makes BBs and WLRMs at this output level, the net profit will be $394000, which means the profit margin will be 19. 7%. As it is less than the target profit margin hich 25%, TRIM should not make 20000 BBS and 10000 WLRMS. e) Make 20000 BBS and 7500 WLRMS (*Please refer to the workings in table 5 of the appendix. ) Concerning producing 20000 BBs and 7500 WLRMs, TRIM needs to add up the 875 set up hours for equipment and 4000 machine hours. If TRIM makes BBs and WLRMs at this output level, the net profit will be $386992, which means the profit margin will be 22. 1%. As it is less than the target profit margin of 25%, TRIM should not consider making 20000 BBs and 7500 WLRMs. 3. Among the above 5 alternatives, if the company cannot expand its capacity beyond he current level, she could only choose the one of producing WLRMs at the lower level which is at 7500 units of outputs since the other four alternatives require the company to purchase extra capacity in setting up equipment, machining the product or labor.
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However, if the company chooses to make 7500 units of the new exercise machine, i. e. WLRMs, she would suffer a net loss of $14008. Thus, it is also nota good choice for the company. If the company really could not expand her capacity, the best choice for her is not to produce either the WLRMs or the BBs. deciding whether TRIM should produce the new products. First of all, as ABC only assigns most of the manufacturing costs and some of the nonmanufacturing costs to products, but not all of them.
I would like to know the amount of those costs which are not assigned since they may be also the relevant costs of making decision. Secondly, I would like to know whether the unused capacity of TRIM has other alternative use in the following two years. In other words, does using the unused capacity contain any opportunity cost? Thirdly, although TRIM has done a marketing researchwhich claims that the new products introduced could still last after two years. However, I would like to know what will be the expected sales volume in the future.
Page 2 TRIM makes BBs Essay
Will it still be able to maintain at the level of 10000 for WLRMs or 20000 for BBs in the future?Fourthly, I would like to know whether the competitors of TRIM will produce similar products, which may lead to a decrease in expected sales and increase in non- manufacturing costs like advertisement, distribution etc. using to boost the sales. Fifthly, I would like to know whether the extra equipment capacity and labor employed are equipped with skill set of producing the new products.See More on Costs