Kota Mals produces two types of brocade, silk and polyester. Last month 450 bolts of the polyester brocade and 4,000 bolts of the silk brocade were produced and sold. Average prices and costs for the two products for last month were: Brocade Polyester Silk Selling price Direct materials Direct labour Variable overhead Product line fixed costs Corporate fixed costs Average Margin per unit The Kota brocade production line is highly automated. As a result, changes in production will have no impact on labour costs. The direct labour employees are all permanent and 40 hours per week checking the quality on the production line. All costs, other than corporate fixed costs listed under each product line, can be avoided if either product line is dropped. Corporate foxed costs totals $125,000 per month. Corporate fixed costs of $10,000 can be avoided if the polyester were dropped. Corporate fixed costs of $15,000 can be avoided if the silk brocade is dropped. The remaining $100,000 can only be avoided by going out of business. Haywood Mills has offered to supply the polyester brocade at a cost of $55 per bolt. Required: Calculate the total contribution margin for each product, assuming the sales mix is the same as last month's. (3 marks) ii. Calculate the breakeven sales volume (in units produced and sold) for polyester brocade. In other words, what is the sales volume at which Kota should be financially indifferent between dropping and retaining the polyester brocade? (3 marks) iii. Calculate whether the Haywood Mills offer should be accepted on financial grounds. (4 marks) iv. Discuss at least five qualitative factors that would affect the decision to keep, drop or outsource the polyester brocade. (15 marks) Presentation: Cut and paste your spreadsheet results and formula view into your word document. The formula view should include the column letters and the row numbers Question 4 Lean Thinking Divine Denim (25 marks) Holen Croker has been discussing production costs with others in the garment industry. Lean thinking was a term other producers have been discussing as a way of controlling costs Climbing costs are eating away at Helen's profits, so to reduce costs she thought of moving production offshore. Going Offshore will make it more difficult to maintain quality while keening reduction onshore enables her to contribute to her local community. She has come to you a partner in Good Numbers, asking for some information about lean thinking Required: 3/3/2020 for Helen which describes the concept of lean thinking. In this report identify a Prepare discovered through your internet searches that has adopted lean thinking. (7 marks) Using the business you identified as a case study: 1. explain how lean thinking has been implemented and used. (9 marks) ii. outline the benefits achieved by adopting lean thinking. (9 marks) (max 1,200 words)
