$$

Current Attempt in Progress

Blue Spruce Plus manufactures small private$-$label electronic products, such as alarm clocks, stopwatches, kitchen timers, calculators, and automatic pencil sharpeners. It sells some of the products as sets and others individually. The company studies the products for their sales potential and then makes cost estimates. The engineering department develops production plans, and then production begins. The company has generally had very successful product introduction. It has discontinued only two products it has introduced.

One of the products it currently sells is a multi$-$alarm alarm clock. The clock has four alarms that can be programmed to sound at various times and for varying lengths of time. The company has had a lot of trouble making the circuit boards for the clocks. The production process has never operated smoothly. The product is currently unprofitable, mainly because of warranty repairs and product recalls. Two models of the clocks were recalled, for example, because they sometimes caused an electric shock when the alarms were being shut off. The engineering department is trying to revise the manufacturing process, but the revision will take another six months at least.

The clocks were very popular when they were introduced, and since they are a private label, the company has not suffered much from the recalls. Presently, the company has a very large order for several items from a major retailer with locations across Canada. The order includes $5,500$ of the multi$-$alarm clocks. When the company suggested that the retailer purchase the clocks from another manufacturer, the retailer threatened to cancel the entire order unless the clocks were included.

The company has therefore investigated the possibility of having another company make the clocks for it$.$ Its bid for the retailer's order was based on an estimated $$6\mathrm{.}99$ cost to manufacture the clocks, broken down as follows:

$\backslash$table$[[$Circuit board, $1$ each @ $$2\mathrm{.}40,$$$2\mathrm{.}40$