Larinore Corporation has a Castings Division that does casting
Question # 00088069
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Updated on: 08/03/2015 09:21 AM Due on: 09/02/2015
| Larinore Corporation has a Castings Division that does casting work of various types. The company's Machine Products Division has asked the Castings | ||||
| to provide it with 20,000 special castings each year on a continuing basis. The special castings | ||||
| would require $10 per unit in variable production costs. The Machine Products Division has a bid from an outside supplier of $29 per unit for the castings. | ||||
| In order to have time and space to produce the new castings, the Castings Division would have to cut back production of another casting: the RB4, which it presently is producing. The | ||||
| RB4 sells for $30 per unit, and requires $12 per unit in variable production costs. Boxing and shipping costs of the RB4 are $4 per unit. Boxing and shipping costs for the new special | ||||
| casting would be only $1 per unit. The company is now producing and selling 100,000 units of the RB4 each year. Production and sales of this casting would drop by 20% if the new | ||||
casting is produced.
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Rating:
/5
Solution: Larinore Corporation has a Castings Division that does casting