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Information about the 2 divisions of The Hobbit Car Emporium is as follows; Froto Windshield Division Bilbo Car Company capacity 80,000 windshields 50,000 cars variable
Information about the 2 divisions of The Hobbit Car Emporium is as follows; | ||||||||||
Froto Windshield Division | Bilbo Car Company | |||||||||
capacity | 80,000 windshields | 50,000 cars | ||||||||
variable cost of windshield: | $400 | |||||||||
variable cost of car | $12,000 plus cost of windshield | |||||||||
Bilbo Sells cars to the following: | ||||||||||
The Shire Autoplex | 20,000 cars at $14,000 each | |||||||||
Prancing Pony Autos | 20,000 cars at $13,000 each | |||||||||
Cars of Rivendale | 10,000 cars at $12,600 each | |||||||||
Situation 1: | Because Hobbit Cars are a unique size and shape, there is no outside market for Froto's Windshields | |||||||||
a) What transfer price should be used to 'sell' windshields to Bilbo? | ||||||||||
b) How many cars should Bilbo make and sell? | ||||||||||
c) how do you evaluate Froto and Bilbo (cost, revenue, or profit center)? | ||||||||||
Situation 2: | MordorZone, the Middle Earth's largest auto supply store wants to buy up to 80,000 windshields from Froto at $900 each | |||||||||
a) How many windsheilds should be sold to MordorZone to maximize Hobbit profits? | ||||||||||
b) What transfer price should be used to 'sell' windshields to Bilbo? | ||||||||||
C) How many cars should Bilbo make and sell? | ||||||||||
d) How do you evaluate Froto and Bilbo (cost, revenue, or profit center)? | ||||||||||
Situation 3: | You are Gandoff, CEO of Hobbit Car Emporium and MordorZone, the Middle Earth's largest auto supply store want to buy up to 30,000 windshields | |||||||||
from Froto at $900 each | ||||||||||
a) How many windshields should be sold to MordorZone to maximize Hobbit Profits? | ||||||||||
b) What transfer price should be used to 'sell' windshields to Bilbo? | ||||||||||
c) How many cars should Bilbo make and sell? | ||||||||||
d) How do you evaluate Froto and Bilbo (cost, revenue or profit center)? | ||||||||||
BONUS 5 POINTS (NO PARTIAL CREDIT) MordorZone wants to buy 50,000 windshields from Froto at a price of $575 each. MordorZone is unwilling to compromise on either | ||||||||||
the price or the quantity, so Froto either sells 50,000 or 0 windshields to MordorZone. What is the impact on Hobbit income if Froto sells windshields to MordorZone? | ||||||||||
I want a dollar amount and whether profits increase or decrease. | ||||||||||
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