Manufacturing lead times, relevant revenues, and relevant costs. The Brandt Corporation makes wire harnesses for the aircraft

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Manufacturing lead times, relevant revenues, and relevant costs. The Brandt Corporation makes wire harnesses for the aircraft industry. Brandt is uncertain about when and how many customer orders will be received. The company makes harnesses only after receiving firm orders from its customers. Brandt has recently purchased a new machine to make two types of wire harnesses, one for Boeing airplanes (B7) and the other for Airbus Industries airplanes (A3). The annual capacity of the new machine is 6,000 hours. The following information is available for next year:

Selling Price per Order If Average Manufacturing Lead Time per Order Is Inventory Caпying Cost per Order per Hour Annua

1. Calculate the average manufacturing lead times per order 

(a)    If Brandt manufactures only B7 and 

(b)    If Brandt manufactures both B7 and A3.

2. Even though A3 has a positive contribution margin, Brandt’s managers are evaluating whether Brandt should (a) make and sell only B7 or (b) make and sell both B7 and A3. Which alternative will maximize Brandt’s operating income? Show your calculations.

3. What other factors should Brandt consider in choosing between the alternatives in requirement 2?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Cost Accounting A Managerial Emphasis

ISBN: 978-0136126638

13th Edition

Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav

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