The paper focuses rather on how to establish the wanted design using a step-by- step approach instead of primarily describing the pure house design as such. Table of Contents Abstract O Background 2 Calculations 3 Recommendations Background Our case evaluates two radar detecting products sold by Dart Products: the Bear Detector and the Lion Tamer. The latter was introduced last year which caused the company to separately calculate direct material and direct labor costs. The dilemma is that the organization’s accounting information indicates that the Bear detector is no longer profitable and is manufactured at a loss.
The Lion Tamer, on the Other hand is selling quite well and is profitable according to the accounting figures. Below is a table that offers a picture of there revenues and cost. The decision that company faces is whether to discontinue its Bear Detector and solely focus on the the Lion Tamer. The following are some key data points which ill assist us in making an accurate recommendation: *The labor rate is IS per hour Two separate production operations, fabrication and assembly. I Assembly (hrs per unit) I Fabrication(hrs per unit) I Bear 2. 01 01 Lion 1. 1 0. 51 * Annual Fabricating Department overhead cost function $200,000 $5(Briar hours) * Annual Assembly Department overhead cost function $20,000 + $11(labor hours) Calculations We inputted the Labor hours used for the two different detectors, to the separate production operation overhead cost functions. Our results for Bear Detectors is that annual cost where incorrectly calculated by the company. Our cost function 20,000 4 130,000 The 130,000 would be our overhead manufacturing cost, significantly lower than what the company said it to be.
Lets now turn our attention to the Lion Tamer and its cost function Fabrication *2000 = 210,000 Assembly 520,000 4 11*1000 = 31 ,000 Below is a revised table The Bear Detector is actually the route to the company’s profit, and the Lion Tamer is being manufactured at a loss, The company believes that the Lion Tamer is the premiere profitable product: however that notion is erroneous and is predicated upon incorrect accounting. Recommendations We propose that the company gradually increase the price of the Lion Tamer, o approximately 200 dollars per unit.
Otherwise they Will continue to manufacture the product at a loss. They must also be weary of how high they price the product because one Of their competitors Nineteen Company is on the brink of filing for bankruptcy because they priced a similar product ATA high price. Additionally, it would be in the company’s best interest to wait until Nineteen Company does in fact go bankrupt, thus eliminating competition. Most importantly, Dart Products should not discontinue the Bear Detector because currently it is the organization’s profitable product.