Hilton Manufacturing Company

Hilton Manufacturing Company Should result 103 have been dropped? (3 ways to see) 1) Lost sales ($5,202) Cost savings DL $1,341 Compensation redress 67 DM 946 Power 59 Supplies 68 2,501 Repairs 20 Lost CM total impact of dropping ($2,701) 2) spill eliminated Costs that remain Rent Property tax Property insurance In get off labor Compensation ins. Light and foment Building overhaul Selling expense General admin Depreciation Interest Other income do impact 3) $404 $365 78 103 448 21 20 14 917 346 713 102 (10) 3,117 (2,703) nit CM (see later) meat impact lost CM = 5. 3909 x 510,276 = $2,702 Which product is most economic? 101 VC DL Compensation insurance Power DM Supplies Repairs nub Selling determine CM/whole CM ratio . 1164 2. 3282 . 0403 1. 3766 . 0941 . 0319 3. 9875 9. 3084 5. 3209 57% . 1137 2. 2740 . 0929 1. 7542 . 1774 . 0557 4. 4709 9. 6900 5. 2191 53% . 1337 2. 6746 . 1171 1. 8862 . 1363 . 0396 4. 9875 10. 3784 5. 3909 52% Products 102 103 (If the plant is near capaci ty of available direct labor hours) CM/capacity (LH) $2. 285/h 2. 95/h 2. 016/h Which is the most profitable product depends on the decision question and the comparable criterion 2 Should price of 101 be dropped to $8. 64? VC unit costs forecasted 1991 change DL 2. 3282 Compensation insurance . 1164 Power . 0403 Materials 1. 3766 +5% Supplies . 0941 +5% Repairs . 0319 unit costs 1992 2. 3282 . 1164 . 0403 1. 4454 . 0988 . 0319 heart and soul 3. 9875 4. 0610 (cost increase 7% of heat and light is ignored because the increase is fixed regardless of the pricing decision) expenditure cash discount (1. 8%) vc unit CM x units Total CM $9. 41 0. 1016 4. 0610 5. 2474 750,000 $3,935,550 $8. 64 . 0933 4. 0610 4. 4857 1,000,000 $4,485,700 What is the minimum quantity to sell at $8. 64 to be not worse off than remaining at the $9. 41? 3,935,550/4. 4857 = 877,355 margin of safety 122,645 units What is the minimum quantity to sell at $9. 41 to be not worse off than reducing the price? 4,485,000 /5,2474 = 854,842 need to sell 104,842 more units 3