Consultants for Winston & Company have compiled data for several different expansion options for the executive team. The span of options will encompass the company's key areas, including finance, marketing, production, and product mix. You are not required to select ANY of the expansion recommendations. If you decide not to select an option, you MUST explain why. Finance: The company is considering a number of options. Sales have increased over the past several years, but the board wants faster growth. There are a number of options to accomplish this goal. Merger: Winston & Company could merge with a competitor Gee Whiz Toys. They make other outdoor products such as bikes & helmets & kneepads. Their product costs are the same as Winston & Company, but they are a union shop. So labor costs for each product are 25% more. If you merge with them, you can expect your workforce will also unionize, and labor costs will increase. The benefits of a merger will increase product revenue by 40% for all of the product lines. New Plant: The company can expand production by investing in a new plant. The estimated cost for the new plant will be $10,000,000, which will be added to fixed costs. The debt will be financed as an increase of $1.00 per each unit of production. Production capacity will increase by 50%. It is expected all the additional capacity will be sold. Marketing: The marketing department has been testing several different products as a means to expand sales. One of the product lines they considered is a line of Winston & Co foam dog toys. Below are two of the products that are testing well:

Winston & Company Dog Frisbee

Sales Price is $14.99 Material Cost = $4.00 Labor Cost: $3.00 Fixed Cost: $1.00

The two products are as follows:

Bike headlamp and generator

This innovative product includes an attached generator that rides along the wheel.

The cost of each unit is $30 landed; this does not include the royalty payment. The unit will retail for $50. The inventor expects a $2.00 royalty per unit. The production and finance teams agree it would cost at least $45.00 to manufacture the units at a plant in the United States.

Bicycle Computer

This is an advanced bicycle computer. The inventor of this product has designed it to download your rides to an app on a smartphone. The inventor has been able to locate a production facility that can manufacture the computer for $80 landed, not including the royalty payment. The retail price is expected to be $120. The inventor expects a $5.00 royalty per unit.

Marketing and sales estimate that they can sell at least 20,000 of the headlamps in the first year, and sales will increase by at least 10% each year afterward.

Marketing is not certain about the demand for the bicycle computer. They estimate it will be between 8,000 and 12,000 per year. After year one, they speculate sales will only increase by 5% yearly.

The sales team is optimistic about the new products, they see the high retail price as a quick way to increase gross sales (which will make it easier for them to reach sales goals). If they reach the sales goals set by the board of directors, they will earn a generous bonus.