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It is currently January 2 0 2 3 and Trial Industries Limited ( Trial ) manufactures batteries for the automobile sector, mainly for the North
It is currently January and Trial Industries Limited Trial manufactures batteries for the automobile sector, mainly for the North American NA market. The company, located in Canada, has grown consistently over the past years and, two years ago, decided to install a manufacturing system which was computer automated and it has significantly increased manufacturing capacity. Trial is very proud of the quality of their batteries and each battery sold holds a three year warranty from the date of sale, no exceptions, which is above the industry standard of two years. Trial expects batteries to last, on average, five years from the date of manufacture based on the standard deterioration of the materials ie battery cells Trial sells batteries in three main markets: NA automobile manufacturers, NA automotive replacement parts distributors, and nonNA automobile manufacturers and replacementpart distributors. Sales are made to automobile manufacturers through a bidding process, and contracts are generally years and are not applicable for sales commissions. Sales to replacementparts distributors are made by the sales team who use a standard price per battery. Sales staff are each paid a base salary and an additional percent commission on the sales price of the order. Trial currently has existing sales commitmentsorders that would utilize percent of its capacity over the year. Based on previous years results, it can expect an additional percent capacity for shortterm short notice sales during Four potential contracts awaiting renewalapproval by the president are as follows: Trial uses a standard cost system under which total overhead is charged at a standard rate based on the factorys previous years expected activity. The standards for were based on the expected activity of machine hours which was approximately of total capacity. With the new automated equipment, the total available machine hours remains the same for and approximately of the manufacturing overhead rate allocation for represents fixed costs. Generic Motors is open for tenders on a new contract starting in for batteries during and estimated to remain consistent for an additional years. The standard costs for batteries for the contract is shown in appendix The president believes the bid would be successful on the contract if it were to be submitted with a total price $ This contract could strain the relation ship between Trial and Floord, another NA automobile manufacturer, since Floord is a direct competitor for Generic. Trial has done business with Floord for over years, however, the contract is coming up for renewal in Canadian Auto Assembly CAA an automotive parts distributer, has repeatedly purchased from Trial in the past, however, in relatively small batches up to units at a time. CAA has requested a percent discount on the list price for a large order of batteries for delivery increments each month in see appendix for additional information Trial is not aware of the reasoning behind the large order and does not know the intention of CAA for the batteries ie internal use or external sales A European exporter has approached Trial to manufacture and supply batteries to its provided specifications at a price well below the normal list price for a standard Trial battery see appendix for additional information The specifications are well below acceptable quality standards for Trial and would not be acceptable for North American Automobile manufacturers. Although, the batteries would not bear the logo for Trial, the president believes that they would be packaged by the exporter to resemble brand name products of Trial. The exporter aims to resell these batteries as their own. This new order would have a sales price of $ per battery and it would a save for direct materials cost and save half an hour in labour per battery. An Irish automobile manufacturer has offered to buy modified batteries which have been in Trials inventory for three years see appendix These batteries were left over from a special order for a customer who had declared bankruptcy before the batteries were delivered. The batteries were going to be sold for $ in the special order, however, they were never paid for three years ago and thus never shipped. The current offer is $ representing a discount, which is far lower than the original sale, however, the president is having doubts about Trials ability to sell the batteries otherwise. The president of Trial has contracted our firm, Bryanton & Student LLP to assess the required. Prepare the calculations for each of the four potential contracts and determine the total increase or decrease to contribution margin as a result of each contract. Based on the remaining available mach
It is currently January and Trial Industries Limited Trial manufactures batteries for the automobile sector, mainly for the North American NA market. The company, located in Canada, has grown consistently over the past years and, two years ago, decided to install a manufacturing system which was computer automated and it has significantly increased manufacturing capacity.
Trial is very proud of the quality of their batteries and each battery sold holds a three year warranty from the date of sale, no exceptions, which is above the industry standard of two years. Trial expects batteries to last, on average, five years from the date of manufacture based on the standard deterioration of the materials ie battery cells
Trial sells batteries in three main markets: NA automobile manufacturers, NA automotive replacement parts distributors, and nonNA automobile manufacturers and replacementpart distributors. Sales are made to automobile manufacturers through a bidding process, and contracts are generally years and are not applicable for sales commissions. Sales to replacementparts distributors are made by the sales team who use a standard price per battery. Sales staff are each paid a base salary and an additional percent commission on the sales price of the order.
Trial currently has existing sales commitmentsorders that would utilize percent of its capacity over the year. Based on previous years results, it can expect an additional percent capacity for shortterm short notice sales during Four potential contracts awaiting renewalapproval by the president are as follows:
Trial uses a standard cost system under which total overhead is charged at a standard rate based on the factorys previous years expected activity. The standards for were based on the expected activity of machine hours which was approximately of total capacity. With the new automated equipment, the total available machine hours remains the same for and approximately of the manufacturing overhead rate allocation for represents fixed costs.
Generic Motors is open for tenders on a new contract starting in for batteries during and estimated to remain consistent for an additional years. The standard costs for batteries for the contract is shown in appendix The president believes the bid would be successful on the contract if it were to be submitted with a total price $ This contract could strain the relation ship between Trial and Floord, another NA automobile manufacturer, since Floord is a direct competitor for Generic. Trial has done business with Floord for over years, however, the contract is coming up for renewal in
Canadian Auto Assembly CAA an automotive parts distributer, has repeatedly purchased from Trial in the past, however, in relatively small batches up to units at a time. CAA has requested a percent discount on the list price for a large order of batteries for delivery increments each month in see appendix for additional information Trial is not aware of the reasoning behind the large order and does not know the intention of CAA for the batteries ie internal use or external sales
A European exporter has approached Trial to manufacture and supply batteries to its provided specifications at a price well below the normal list price for a standard Trial battery see appendix for additional information The specifications are well below acceptable quality standards for Trial and would not be acceptable for North American Automobile manufacturers. Although, the batteries would not bear the logo for Trial, the president believes that they would be packaged by the exporter to resemble brand name products of Trial. The exporter aims to resell these batteries as their own. This new order would have a sales price of $ per battery and it would a save for direct materials cost and save half an hour in labour per battery.
An Irish automobile manufacturer has offered to buy modified batteries which have been in Trials inventory for three years see appendix These batteries were left over from a special order for a customer who had declared bankruptcy before the batteries were delivered. The batteries were going to be sold for $ in the special order, however, they were never paid for three years ago and thus never shipped. The current offer is $ representing a discount, which is far lower than the original sale, however, the president is having doubts about Trials ability to sell the batteries otherwise.
The president of Trial has contracted our firm, Bryanton & Student LLP to assess the required.
Prepare the calculations for each of the four potential contracts and determine the total increase or decrease to contribution margin as a result of each contract.
Based on the remaining available mach
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