The Scottie Sweater Company produces sweaters under the "Scottie"" label, The company buys raw wool and processes it into wool yarn from which the sweaters are woven; One spindie of wool. vam is required to produce one sweater. The costs and revenues assoclated with the sweaters are given belaw: Originally, af of the wool yarn was used to produce sweaters, but in recent years a market has developed for the wool yarn itself. The yarn is purchased by osher companies for use in production of wool blankets and other wool products. Sinte the development of the market for the wool yarn. a continuing dispute has existed in the Scottie Sweiter Company as to whether the yarn should besold simply as yarn or processed into sweaters. Curtent cost and revenue data on the yarn are given below: The market for sweaters is temporarily depressed, due to unusualy warm weather in the western rates where the sweaters are sold. This has made in necestary for the compary to discount the selling price of the sweaters to 534 fram the normal S40 price Since the markes for wool varn has rerruined strong, the dapute har again sarfaced over whether the yarn should be sais outright. rather than processed into sweaters. The sales manager thinks that the production of sweaters thould be discontinued; the bousset about having to sell sweates at a loss whien the yarn could be wold for a prefit. Howerer, the production superintendent does not want to close down a large portion of the factory its argues that the company is in the tweater bowinest, not the yarn business, and the company sheuld forus on its core strengeth. The market for sweaters is temporarily depressed, due to unusually warm weather in the western states where the sweaters are sold. This has made it necessary for the company to discount the selling price of the sweaters to $34 from the normal $40 price. Since the market for wool yarn has remained strong, the dispute has again surfaced over whether the yarn should be sold outright rather than processed into sweaters. The sales manager thinks that the production of sweaters should be discontinued; she is upset about having to sell sweaters at aloss when the yarn could be sold for a profit. However, the production superintendent does not want to close down a large portion of the factory. He argues that the company is in the sweater business, not the yarn business, and the company should focus on its core strength. All of the manufacturing overhead costs are foxed and would not be affected even if sweaters were discontinued. Manufacturing overhead is assigned to products on the basis of 150% of direct labor cost. Material and direct labor costs are variable. The President to the Scottie Sweater Company, Samantha Scottie, has hired your consulting firm to address these issues. Specifically, she wants to know whether the company should continue to manufacture sweaters or just sell the yarn. In addition, since the price of sweaters has been changing, is there a price they should consider stopping or continuing to sell sweaters? Be sure to address the following: o The financial advantage (disadvantage) of further processing ane spindle of wool yarn into a sweater. o The lowest price the company should accept for the sweater. Hints: If you recommend stop selling sweoters then your lowest price for sweaters must be higher than the current price. If you recommend continuing to sell sweaters your lowest price must be less than the current price. The company must produce the yarn to produce the sweater. This is not o declion of whether to produce yarn or sweaters, the decision is whether to process the yorn into sweoters or stop at the yarn