Recommendation for to keep or discontinue heat exchange
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Apa format paper
Proper citation, such as usine direct or words of your own.
Direct quote must have quotation as “Internal control is” (Internal
Control, 2015). Etc give the page number (p. or paragraph (para 2).
The citation and references must match in paper do not use
[] for citation
Length: 2 pages in
detail explanation
The general manager at the Overall Manufacturing Company has
submitted the following information for a specific line of heat exchangers with
the recommendation to discontinue the round style heat exchanger because of its
continued net operating income losses.
|
Overall Manufacturing Company |
||||
|
Heat Exchangers |
||||
|
Total |
Round |
Rectangular |
Octagonal |
|
|
Sales |
$1,000,000 |
$140,000 |
$500,000 |
$360,000 |
|
Less variable expenses |
$410,000 |
$60,000 |
$200,000 |
$150,000 |
|
Contribution margin |
$590,000 |
$80,000 |
$300,000 |
$210,000 |
|
Less fixed expenses: |
||||
|
Advertising |
$216,000 |
$41,000 |
$110,000 |
$65,000 |
|
Depreciation |
$95,000 |
$20,000 |
$40,000 |
$35,000 |
|
Line supervisors’ salaries |
$19,000 |
$6,000 |
$7,000 |
$6,000 |
|
General factory overhead* |
$200,000 |
$28,000 |
$100,000 |
$72,000 |
|
Total fixed expenses |
$530,000 |
$95,000 |
$257,000 |
$178,000 |
|
Net operating income (loss) |
$60,000 |
$(15,000) |
$43,000 |
$32,000 |
|
*A common fixed cost that is allocated on the basis of sales |
Analyze the above information to determine if the round heat
exchanger should be discontinued. The special equipment that is used to produce
the round heat exchanger has no resale value. If the round heat exchanger is
discontinued, the two line supervisors who are assigned to the model would be
discharged. Overall Manufacturing Company has no other use for the capacity
that is now being used to produce the round heat exchanger.
Include the following in your analysis:
- Should the production and
sale of the round heat exchanger be discontinued? Show your analysis to
support your answer. - How might this same
information be presented to make it more useful to management in assessing
the long-run profitability of its various product lines? - What policy change would
you recommend to management?
Thanks
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