Question Brookfield Gearbox Products (BGP) manufactures a broad line of gearboxes for cars, trucks, and recreational vehicles. BGP is segmented into three major responsibility centres: Grinding, Forming, and Assembly. Each gearbox must spend a certain amount of time in each of the three departments before it can be shipped to the customer. Inspection takes place in the assembly department and is extremely important because the customers (major auto and truck manufacturers and some small independent specialty producers) demand zero defects in products received. Recently, the owner of BGP has become concerned with the results the firm is achieving. According to Mary Paulson, the newly elected president and majority shareholder, sales volume is increasing but profits are falling rapidly. The two major products are the "standard" and the "deluxe" gearbox, which account for 90% of total sales volume (the remaining products are small and can be ignored for the remainder of this question). Sales for the "deluxe" gearbox have been growing rapidly, to the point where the firm sold twice its usual number in the last six months (this trend has been evident for about two years). Severe price competition has caused BGP to drastically cut the price of its major product, the "standard" gearbox. There is little information concerning the production costs related to specific products. An engineering study was performed three months ago, at the suggestion of the auditors, but nothing has been done with the information. A summary of the engineering study results follows: Raw materials for the "standard" gearbox consist of 18 pounds of metal. There is no wastage or spoilage with respect to a "standard" gearbox. Twenty-two pounds Question Brookfield Gearbox Products (BGP) manufactures a broad line of gearboxes for cars, trucks, and recreational vehicles. BGP is segmented into three major responsibility centres: Grinding, Forming, and Assembly. Each gearbox must spend a certain amount of time in each of the three departments before it can be shipped to the customer. Inspection takes place in the assembly department and is extremely important because the customers (major auto and truck manufacturers and some small independent specialty producers) demand zero defects in products received. Recently, the owner of BGP has become concerned with the results the firm is achieving. According to Mary Paulson, the newly elected president and majority shareholder, sales volume is increasing but profits are falling rapidly. The two major products are the "standard" and the "deluxe" gearbox, which account for 90% of total sales volume (the remaining products are small and can be ignored for the remainder of this question). Sales for the "deluxe" gearbox have been growing rapidly, to the point where the firm sold twice its usual number in the last six months (this trend has been evident for about two years). Severe price competition has caused BGP to drastically cut the price of its major product, the "standard" gearbox. There is little information concerning the production costs related to specific products. An engineering study was performed three months ago, at the suggestion of the auditors, but nothing has been done with the information. A summary of the engineering study results follows: Raw materials for the "standard" gearbox consist of 18 pounds of metal. There is no wastage or spoilage with respect to a "standard" gearbox. Twenty-two pounds
