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Please help ASP with all 3 requirements Part 3: Talon Inc. manufactures three lines of athletic shoes; Trainer, Court Master, and Speedy. Management has requested
Please help ASP with all 3 requirements
Part 3: Talon Inc. manufactures three lines of athletic shoes; Trainer, Court Master, and Speedy. Management has requested an analysis of Speedy due to its low sales and low indicated profitability. All fixed costs are considered unavoidable. Trainer 25,000 Units sold last year Revenue $750,000 Selling price per unit 30.00 Variable cost per unit 24.00 Contribution Margin per unit 6.00 Allocated fixed cost per unit 3.60 Operating profit per unit 2.40 Court Master Speedy 18,750 3,750 $600,000 $150,000 32.00 40.00 24.00 36.00 8.00 4.00 3.60 3.60 4.40 0.40 Total 47,500 $171,000 Part 4: Consider Talon Inc. in part 3 above. Suppose that Talon determines that dropping the Speedy line will release production capacity so that it can manufacture additional units of Court Master. Assume that the production constraints are the automated sewing machine and the inspection and packaging operation. The automated sewing machine can make 20 pair of Court Masters or 30 pair of Speedy's per hour. The inspection and packaging operation requires 15 minutes for a pair of Court Masters (4 per hour) and 5 minutes for a pair of Speedy's (12 per hour). Sales projections, determined on the basis of recent marketing analysis show that sales of Court Master could be increased to 30,000 units if additional capacity were available. Required: 1. If Talon deletes Speedy entirely, how many pairs of Court Master can it manufacture solely because of the capacity released by discontinuing the production of Speedy? 2. What is the dollar effect on operating income if Talon drops the production and sale of Speedy and uses this capacity, and only this released capacity for Court Master? 3. What other factors should Talon consider in its decision to drop Speedy and use the released capacity to produce additional pairs of Court MasterStep by Step Solution
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