Stac Industries is a multiproduct company with several manufacturing plants. The Clinton Plant manufactures and distributes two household cleaning and polishing compoundsregular and heavy duty-under the Cleen-Brite label. The forecasted operating results for

the first six months of 1998 when 100,000 cases of each compound are expected to be manufactured and sold are presented in the following table.
The regular compound sold for $20 a case and the heavy duty sold for $30 a case during the first six months of 1 998. The manufacturing costs per case of product are presented in the following table. Each product is manufactured on a separate production line.
Annual normal manufacturing capacity is 200,000 cases of each product. However, the plant is capable of producing 250,000 cases of regular compound and 350,000 cases of heavy duty compound annually.

The following table reflects the consensus of top management regarding the price/volume alternatives for the Cleen-Brite products for the last six months of 1998. These are essentially the same alternatives management had during the first six months of 1998.

Top management believes the loss for the first six months reflects a tight profit margin caused by intense competition. Management also believes that many companies will be forced out of this market by next year and profits should improve.
Required Each question should be considered independently.
( 1 ) What unit selling price should Stac Industries select for each of the Cleen-Brite compounds (regular and heavy duty) for the remaining six months of 1 998?
(2) Assume the optimum price/volume alternatives for the last six months were a selling price of $23 and volume level of 50,000 cases for the regular compound and a selling price of $35 and volume of 35,000 cases for the heavy duty compound. Should Stac Industries consider closing down its operations until 1999 fn ·order to minimize its losses?

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Cleen-Brite Compounds-Clinton Plant Forecasted Results of Operations For the Six-Month Period Ending June 30, 1998 ($000 omitted) REGULAR HEAVY DUTY TOTAL Sales $2,000 $3,000 $5,000 Cost of sales 1,600 1,900 3,500 Gross profit $ 400 $1,100 $1,500 Selling and administrative expenses Flexible $ 400 $ 700 $1,100 Committed* 240 Total selling and administrative $ 640 360 $1,060 600 $1,700 expenses Income (loss) before taxes $ (240) $ 40 $ (200)