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SHORT TERM DECISION MAKING Glinty Glass manufactures and sells glassware to retail chains and party hire businesses. Currently they have four products: wine glasses, champagne

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SHORT TERM DECISION MAKING Glinty Glass manufactures and sells glassware to retail chains and party hire businesses. Currently they have four products: wine glasses, champagne flutes, tumblers and sherry glasses which are all sold in sets of six. In recent years sherry glasses have not been so popular. Currently, Glinty Glass sells 6,000 sets of sherry glasses per year for $10 each. Variable manufacturing and selling costs for sherry glasses are $6 per set. Fixed costs of $30,000 can be avoided if sherry glasses are not produced. Management are considering two options; ceasing production of sherry glasses or spending $5,000 on advertising sherry glasses which could increase the sales volume for sherry glasses by 1,500 sets. Required: (i) Given the above information, how much would Glinty Glass's profit change if the production of sherry glasses was discontinued? (4 marks) (ii) How much would profit change if $5,000 was spent on Advertising increasing the sales volume of sherry glasses to 7,500 units per year? (3 marks) (iii) Discuss two non-financial considerations management would have to take into account before making their decision to discontinue the production of the sherry glasses. (4 marks)

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