1. Wow! is that Red-92 model ever a loser! It's time to cutback it's production shift our resources toward new Terry 95 model, Garry Taylor, executive vice president of Taylor Products Inc. "Just look at the this income statement I've received from accounting. Terry-95 is generating over eight times as much as profit as Red-92 one-sixth of unit sales. I'm convinced that our future depend on the Terry-95. The year-end statement Thomas was referring is shown below. Sales Cost of Goods sold Gross Margin Less: Selling and Administrative Expense Operating Income No. of units produced $ $ $ $ $ 11,125,000 6,900,000 4,225,000 3,675,000 550,000 Model Red-92 Terry-95 $ 9,000,000 $ 2,125,000 S 5,490,000 $ 1,410,000 $ 3,510,000 $ 715,000 3,450,000 $ 225,000 $ 60,000 $ 490,000 $ 30,000 $ 5,000 "The numbers sure look that way", replied Judy Walker, the company's sales manager. "But why isn't competition more excited about T-95? I know we've been producing the model only for three years, but I am surprised that more of our competitors haven't recognized what a cash cow it is." "I think it's our new automated plant", replied Taylor. "Now it takes only two direct labour-hours to produce a unit of the Red-92 and three direct labour-hours to produce a unit of the Terry-95. That's considerably less than it used to take us. lagree that automation is wonderful", replied Walker. "I suppose that's how we're able to hold down the price of T-95. Turner Company in England tried to bring out a Terry-95 but discovered they couldn't touch our price, But Turner is killing us on the Red-92 by undercutting our price with some of our best customers. I suppose they will pick all of our Red-92 business if we move out of that market. But who cares? We don't have to advertise T-95; it just seems to sell itself." "My only concern about automation is how our manufacturing OH rate has shot up", replied Taylor. "But I think we've got a problem in production. Our total manufacturing OH cost is $2,700,000. That comes out to be a hefty amount per direct labour-hour, but Diana down in accounting has been using dirant 1. Wow! is that Red-92 model ever a loser! It's time to cutback it's production shift our resources toward new Terry 95 model, Garry Taylor, executive vice president of Taylor Products Inc. "Just look at the this income statement I've received from accounting. Terry-95 is generating over eight times as much as profit as Red-92 one-sixth of unit sales. I'm convinced that our future depend on the Terry-95. The year-end statement Thomas was referring is shown below. Sales Cost of Goods sold Gross Margin Less: Selling and Administrative Expense Operating Income No. of units produced $ $ $ $ $ 11,125,000 6,900,000 4,225,000 3,675,000 550,000 Model Red-92 Terry-95 $ 9,000,000 $ 2,125,000 S 5,490,000 $ 1,410,000 $ 3,510,000 $ 715,000 3,450,000 $ 225,000 $ 60,000 $ 490,000 $ 30,000 $ 5,000 "The numbers sure look that way", replied Judy Walker, the company's sales manager. "But why isn't competition more excited about T-95? I know we've been producing the model only for three years, but I am surprised that more of our competitors haven't recognized what a cash cow it is." "I think it's our new automated plant", replied Taylor. "Now it takes only two direct labour-hours to produce a unit of the Red-92 and three direct labour-hours to produce a unit of the Terry-95. That's considerably less than it used to take us. lagree that automation is wonderful", replied Walker. "I suppose that's how we're able to hold down the price of T-95. Turner Company in England tried to bring out a Terry-95 but discovered they couldn't touch our price, But Turner is killing us on the Red-92 by undercutting our price with some of our best customers. I suppose they will pick all of our Red-92 business if we move out of that market. But who cares? We don't have to advertise T-95; it just seems to sell itself." "My only concern about automation is how our manufacturing OH rate has shot up", replied Taylor. "But I think we've got a problem in production. Our total manufacturing OH cost is $2,700,000. That comes out to be a hefty amount per direct labour-hour, but Diana down in accounting has been using dirant