Special Order; Strategy; International Williams Company, located in southern Wisconsin,manufactures a variety of industrial valves and pipe fittings that are sold to customers in nearbystates. Currently, the company is operating at about 70% capacity and is earning a satisfactory returnon investment.Glasgow Industries Ltd. of Scotland has approached management with an offer to buy 120,000units of a pressure valve. Glasgow Industries manufactures a valve that is almost identical toWilliams’s pressure valve; however, a fire in Glasgow Industries’s valve plant has shut down itsmanufacturing operations. Glasgow needs the 120,000 valves over the next 4 months to meetcommitments to its regular customers; the company is prepared to pay $21 each for the valves.Williams’s product cost for the pressure valve, based on current attainable standards, follows:[LO 11-2][LO 11-2]Direct materials $ 6Direct labor (0.5 hour per valve) 8Manufacturing overhead (1/3 variable) 9Total manufacturing cost $23Final PDF to printerblo17029_ch11_411-459.indd 448 02/19/18 09:08 AM448 Part Two Planning and Decision MakingAdditional costs incurred in connection with sales of the pressure valve are sales commissionsof 5% and freight expense of $1 per unit. However, the company does not pay sales commissions onspecial orders that come directly to management. Freight expense will be paid by Glasgow.In determining selling prices, Williams adds a 40% markup to product cost. This provides a $32suggested selling price for the pressure valve, rounded to the nearest whole dollar. The marketingdepartment, however, has set the current selling price at $30 to maintain market share.Production management believes that it can handle the Glasgow Industries order withoutdisrupting its scheduled production. The order would, however, require additional fixed factoryoverhead of $12,000 per month in the form of supervision and clerical costs.If management accepts the order, Williams will manufacture and ship 30,000 pressure valvesto Glasgow Industries each month for the next 4 months. Shipments will be made in weeklyconsignments, FOB shipping point.Required1. Determine how many additional direct labor hours (DLHs) will be required each month to fill theGlasgow order. Round your answer to the nearest whole number. 2. Prepare an analysis showing the impact on operating income of accepting the Glasgow order.3. Calculate the minimum unit price that Williams’s management could accept for the Glasgow orderwithout reducing operating income. Round answer to 2 decimal places. 4. To prove your answer to requirement 3, use the Goal Seek function in Excel to calculate the minimumunit selling price (to 2 decimal places) for the special sales order.5. Suppose now that if the Glasgow order were accepted, sales of 5,000 units per month to regularcustomers would be precluded (at a selling price of $30 per unit). All other facts are as given in thisproblem. What is the revised breakeven selling price per unit for the Glasgow special sales order?Round answer to 2 decimal places. 6. Identify the strategic factors that Williams should consider before accepting the Glasgow order.7. Identify the factors related to international business that Williams should consider before accepting theGlasgow order.
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
Special Order; Strategy; International Williams Company, located in southern Wisconsin,
manufactures a variety of industrial valves and pipe fittings that are sold to customers in nearby
states. Currently, the company is operating at about 70% capacity and is earning a satisfactory return
on investment.
Glasgow Industries Ltd. of Scotland has approached management with an offer to buy 120,000
units of a pressure valve. Glasgow Industries manufactures a valve that is almost identical to
Williams’s pressure valve; however, a fire in Glasgow Industries’s valve plant has shut down its
manufacturing operations. Glasgow needs the 120,000 valves over the next 4 months to meet
commitments to its regular customers; the company is prepared to pay $21 each for the valves.
Williams’s product cost for the pressure valve, based on current attainable standards, follows:
[LO 11-2]
[LO 11-2]
Direct materials $ 6
Direct labor (0.5 hour per valve) 8
Manufacturing overhead (1/3 variable) 9
Total
Final PDF to printer
blo17029_ch11_411-459.indd 448 02/19/18 09:08 AM
448 Part Two Planning and Decision Making
Additional costs incurred in connection with sales of the pressure valve are sales commissions
of 5% and freight expense of $1 per unit. However, the company does not pay sales commissions on
special orders that come directly to management. Freight expense will be paid by Glasgow.
In determining selling prices, Williams adds a 40% markup to product cost. This provides a $32
suggested selling price for the pressure valve, rounded to the nearest whole dollar. The marketing
department, however, has set the current selling price at $30 to maintain market share.
Production management believes that it can handle the Glasgow Industries order without
disrupting its
overhead of $12,000 per month in the form of supervision and clerical costs.
If management accepts the order, Williams will manufacture and ship 30,000 pressure valves
to Glasgow Industries each month for the next 4 months. Shipments will be made in weekly
consignments, FOB shipping point.
Required
1. Determine how many additional direct labor hours (DLHs) will be required each month to fill the
Glasgow order. Round your answer to the nearest whole number.
2. Prepare an analysis showing the impact on operating income of accepting the Glasgow order.
3. Calculate the minimum unit price that Williams’s management could accept for the Glasgow order
without reducing operating income. Round answer to 2 decimal places.
4. To prove your answer to requirement 3, use the Goal Seek function in Excel to calculate the minimum
unit selling price (to 2 decimal places) for the special sales order.
5. Suppose now that if the Glasgow order were accepted, sales of 5,000 units per month to regular
customers would be precluded (at a selling price of $30 per unit). All other facts are as given in this
problem. What is the revised breakeven selling price per unit for the Glasgow special sales order?
Round answer to 2 decimal places.
6. Identify the strategic factors that Williams should consider before accepting the Glasgow order.
7. Identify the factors related to international business that Williams should consider before accepting the
Glasgow order.
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