1. Hunter Industries, Inc. is a manufacturer of soup and condiment products under its own standard...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1. Hunter Industries, Inc. is a manufacturer of soup and condiment products under its own standard and premium labels. The company has been in business for many years and is a "household name". Their Denver soup plant has a capacity of 120,000 cases/mo, but has been operating at a normal volume of 95,000 cases/mo. Hunter has been approached by Dino Mart, a large discount retailer, about producing a line of soups under a Dino Mart house label. Dino would initially place an order for 16,000 cases/mo, with the understanding that the order will be expanded if the product is successful. The initial order would be for a reduced line of six relatively simple soups. The soups would be made following Hunter's recipes, except that some cheaper ingredients would be used, reducing cost by $1.50/case. All of these soups have essentially the same production cost of $26 per case, as follows: ingredients and packaging, S14; direct labor, $2; overhead, $10. The overhead is 65% fixed manufacturing costs, 10% variable manufacturing costs, and 25% allocated general corporate overhead. Hunter would incur $5,000/mo additional setup costs if the order is accepted. Packaging would cost ten cents/case less because of a cheaper label used by Dino. Hunter normally sells these soups for $34/case. Dino Mart has offered $20/case, arguing that the steep discount is necessary for them to price the product in conformity with their pricing philosophy and customer expectations. The regional marketing director is inclined to reject the offer, because it is below cost, and therefore Hunter will lose money on the contract. The ultimate decision is up to the regional director of operations. Required: Discuss the factors that the operations director should consider in making the decision. 1. Hunter Industries, Inc. is a manufacturer of soup and condiment products under its own standard and premium labels. The company has been in business for many years and is a "household name". Their Denver soup plant has a capacity of 120,000 cases/mo, but has been operating at a normal volume of 95,000 cases/mo. Hunter has been approached by Dino Mart, a large discount retailer, about producing a line of soups under a Dino Mart house label. Dino would initially place an order for 16,000 cases/mo, with the understanding that the order will be expanded if the product is successful. The initial order would be for a reduced line of six relatively simple soups. The soups would be made following Hunter's recipes, except that some cheaper ingredients would be used, reducing cost by $1.50/case. All of these soups have essentially the same production cost of $26 per case, as follows: ingredients and packaging, S14; direct labor, $2; overhead, $10. The overhead is 65% fixed manufacturing costs, 10% variable manufacturing costs, and 25% allocated general corporate overhead. Hunter would incur $5,000/mo additional setup costs if the order is accepted. Packaging would cost ten cents/case less because of a cheaper label used by Dino. Hunter normally sells these soups for $34/case. Dino Mart has offered $20/case, arguing that the steep discount is necessary for them to price the product in conformity with their pricing philosophy and customer expectations. The regional marketing director is inclined to reject the offer, because it is below cost, and therefore Hunter will lose money on the contract. The ultimate decision is up to the regional director of operations. Required: Discuss the factors that the operations director should consider in making the decision.
Expert Answer:
Answer rating: 100% (QA)
In the given scenario Hunter industries Has a capacity of 120000 cases mo and right now running at 95000 casesmo which means it has idle capacity of 2... View the full answer
Related Book For
Quantitative Methods for Business
ISBN: 978-0324651751
11th Edition
Authors: David Anderson, Dennis Sweeney, Thomas Williams, Jeffrey cam
Posted Date:
Students also viewed these accounting questions
-
Which of the following types of evidence would an auditor most likely examine to determine whether internal control is operating as designed?
-
The Installment Jewelry Company has been in business for 5 years but has never had an audit made of its financial statements. Engaged to make an audit for 2007, you find that the company's balance...
-
The Costello Music Company has been in business for five years. During that time, the sales of electric organs have grown from 12 units in the first year to 76 units in the most recent year. Fred...
-
A mixture containing KClO3, K2CO3, KHCO3, and KCl was heated, producing CO2, O2, and H2O gases according to the following equations: The KCl does not react under the conditions of the reaction. If...
-
In terms of physics, why do restaurants serve baked potatoes wrapped in aluminum foil?
-
What does the suffix O in aluminum 6061-O represent?
-
The Wide World of Fluids article titled "Bow Thrusters,".The bow thruster on the boat shown in Fig. P5.77 is used to turn the boat. The thruster produces a \(1-\mathrm{m}\)-diameter jet of water with...
-
1. The discussion of money issues is the first of a four-step process to help couples successfully manage their finances. The process might be summarized as (a) talk, (b) track, (c) plan and act, and...
-
Analyze the Navier-Stokes equations in the context of fluid dynamics, focusing on their mathematical complexity and physical interpretation, and discuss the conditions under which these equations...
-
Identify the thesis in the following passage in The data used to estimate the value of unpaid household labor is provided by the American Census Bureau. In order to make an accurate estimate of...
-
'Casablanca' Film Journal In this Film Journal, I would like you to explore tow different fine arts elements that stand out to you in this film. 1. Choose an element to discuss.
-
What is core competence and how are such competences created?
-
Does the possession of a core competence guarantee success? If yes, explain why. If no, explain why.?
-
Briefly describe the connection between Income Statement and Balance Sheet.
-
Assignment Negotiable Instruments 1. Explain what "negotiability" means .? 2. What are the requirements in order for an instrument to be considered negotiable? 3. What is bearer paper? 4. What is...
-
What costing method calculates overhead as an overall overhead rate multiplied by the number of labor hours needed for the project?
-
-x/2 x/4 If A = -x/2 and A-1 =6 then x equals
-
Hilltop Coffee manufactures a coffee product by blending three types of coffee beans. The cost per pound and the available pounds of each bean are as follows: Consumer tests with coffee products were...
-
Assume that the project in Problem 3 has the following activity times (in months): a. Find the critical path. b. The project must be completed in 11/2 years. Do you anticipate difficulty in meeting...
-
For the linear program Max4A + 1B s.t. 10A + 2B 30 3A + 2B 12 2A + 2B 10 A, B 0 a. Write this problem in standard form. b. Solve the problem using the graphical solution procedure. c. What are...
-
Suppose that a forward contract on an asset is written at time zero and there are \(M\) periods until delivery. Suppose that the proportional carrying charge in period \(k\) is \(q S(k)\), where...
-
Complete the second half of the proof of the "forward price formula with carrying cost". To construct the arbitrage, go long one unit of a forward and short one unit spot. To execute the short, it is...
-
A certain 10-year bond is currently selling for \(\$ 920\). A friend of yours owns a forward contract on this bond that has a delivery date in 1 year and a delivery price of \(\$ 940\). The bond pays...
Study smarter with the SolutionInn App