Q. 3.The production, quality and product managers considered their second option to be producing and selling flawed units for 6 months while engineers corrected the problem. Under this option, the company would not disclose the problem and hope for the best. Perhaps none of the product claims would involve any injury; only product replacement would be required at a cost of about $12 per unit.

a.Adjust the 2017 budget for an assumed defect rate of .25% during the first6 months of production. (Note this is a defect rate in addition to the normal rate faced in each year, 2012-2016, which is already accounted for in marketing cost.)

b.Adjust the fixed production cost for 2017 for an additional $2,000,000 in design engineering to solve the problem within a 6-month period. (This will involve the use of overtime and consultants).

What would the product line's profit be under this alternative? What would the return on sales for the product line be? The product manager would have met his profit target of 25% of return on sales in 2017 because as stated in the budgeted income statement, the return on sale for 2017 is expected to be approximately 34.10%. This is approximately 9% higher than the profit target of 25%. EXHIBIT ONE Green Cast, Inc. Oven-Safe Classic Product Income Statement For the years ended December 31, 2012-2016 What would the product line's profit be under this alternative? What would the return on sales for the product line be? The product manager would have met his profit target of 25% of return on sales in 2017 because as stated in the budgeted income statement, the return on sale for 2017 is expected to be approximately 34.10%. This is approximately 9% higher than the profit target of 25%. EXHIBIT ONE Green Cast, Inc. Oven-Safe Classic Product Income Statement For the years ended December 31, 2012-2016