1. What are the strategic opportunities and threats that Delhi is facing? Explain two opportunities and three threats.

2. Calculate the overhead allocation rate for each of the years 2008-2014. Why has the rate gone up significantly in 2010? Does the rate increase mean that Delhi had more overhead costs in 2010? Please note that Delhi uses direct labor costs as the overhead allocation base (cost driver) see Exhibit 4.

3. Thermal systems were profitable during the recession but ended up with a relatively large loss in 2010. Explain the reason and your computation.

4. Delhi has four product line areas in its product portfolio. Susan states that We need to prepare a detailed analysis of discontinuing or selling one of the two under-performing product line areas. (page 5) When determining which product area to discontinue (a decision to drop or keep), is net operating income by product line area (reported in Exhibit 4) an appropriate measure of profitability for Susans strategic analysis? Explain why or why not.

5.Estimate the impact of discontinuing Powertrain systems on Delhis operating income for 2015 using the contribution margin income statement format. Similarly, estimate the impact of discontinuing Thermal systems on Delhis operating income for 2015. Which product line would you recommend to discontinue?

When you estimate the impact, assume that 2015 sales and direct material and labor costs remain unchanged from 2014 except for the elimination of sales and avoidable costs (direct costs, variable overhead, fixed overhead) of the discontinued product line area. Show your work.

Note: When estimating variable overhead vs. fixed overhead and avoidable fixed overhead vs. unavoidable fixed overhead, you may use Exhibit 6 (Overhead Costs Description). Use your best judgment and justify your cost classification.

6. A large competitor has offered to buy the product line you chose in Question #5

a) From the perspective of Delhi, list three advantages of the more focused product portfolio that would result from selling one product line. Also, discuss two risks associated with this divestiture.

b) From the perspective of Delhi employees, briefly discuss one positive impact and one negative impact of selling the plant (product line).

c) Assuming the buyer would close the plant after the purchase and lay off its employees, what impact could the sale have on the local and global community?

7. If you were Susan, what would you recommend to the management of Delhi? Support your decision with

a) financial information from your previous analyses, and

b ) two relevant (non-financial) concepts that you have learned in your other courses, such as Finance, Supply Chain, or Management classes.