Crana manufactures privato-labal small aectronic products, such as alarm clacks, calculators, kitchen timers, stopwatches, and automatic pancil sharpenars. Some of the products are sold as sets, and others are sald individually. Products are studied as to their sales pctential, and hen cost estimates are made thn Enginner ng Department devel s praduction p ans and then production bagins. The company has generally had v r success u product introductions.n y wo products introduced by the company have been discontinued. One of the products currantly sold is a multi-alarm clock. The clock has four alarms that can he programmed to sound at varicus times and for varying langths of tima. The company has experiancod a great deal of cifficulty in making the circuit boards for the clacks. The production process has never operated smoothly. The product is unprofitabla at the present tima, primarily because of warranty repairs and product recalls. Twa models of tha clocks were recalled, for example, because they sometimes caused an Glectric shock when the alarms ware heing shut off. Tha Engineering Department is attempting to revise the manufacturing process, but the ravision will take anather & manths at laast. Tha clocks were vary popular whan they ware introducod, and since thery are private-label, tha company has not suffared much from the recalls. Presently, the company has a vary large order for several itoms from Kmart Stores. The order includes 4 00D of the multi-alarm docks. When the company suggasted that Kmart purchase the clocks from another manufacturer, Kmart threatened to rescind the entire order unless the clacks were includad. The company has therofore invastigated the possibility of having another company make the clocks for them. The dacks were bid for tha Kmart arder based on an estimated $5.04 cost to manufacture: Circuit board, leach@ $1.40 $1.40 0.60 0.44 Plastic case, 1 eachs0.60 Alarms, 450.11 each Labor, 15 minutes $12/hour 3.00 Overhead, $2.00 per labor hour 0.50 Crane could purchase clockes to fill the Kmart order for $10.00 from Trans-Tech Asia, a Korean manufacturer with a very good quality record. Trans-Tech has offered to reduce the price to $7.50 after Crane has been a customer for 6 months, placing an order of at least 1,000 units per month. If Crane becomes a "preferred customer" by purchasing 15,000 units per year, the price would be reduced still further to $4.50 Omega Products, a o a manufacturer, has a so offered to make do s for Crane. They have n ered to sel 4,000 do s or 5.00 each. However, mega products has been in business for on lacal press has reported that the owners may face tax evasion charges soon. The owner of Omega Products is an electronic engineer, hawever, and the quality of the docks is likely to be good 6 months. They have experienced significant tumo r in heir labor free, and the If Crane decides to purchase the clocks from either Trans-Tech or Omega, all the costs to manufacture could be avoided, except a total of $1,000 in averhead costs for machine depreciation. The machinery is fairly new, and has no alternate use. (al) Calculate profit under each of the alternatives if the clocks are to be sold for $14.00 each to Kmart? Make Buy-Trons-Tech Buy-Omega Profit