The Brandt Corporation makes wire harnesses for the aircraft industry only upon 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:

Required
1. Calculate the average manufacturing cycle 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 requirement2?

Transcribed Image Text:

Selling Price per Order if Average Manufacturing Cycle Time per Order Is Annual Average Number of Orders 125 10 Manufacturing Time Required 40 hours 50 hours Less Than Customer B7 АЗ More Than 200 Hours $14.400 12,960 Variable Cost per Order $10,000 Inventory Carrying Cost per Order per Hour $0.50 0.45 200 Hours $15,000 13,500 9,000